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More About This Title Investing in the Age of Sovereign Defaults: How to Preserve Your Wealth in the Coming Crisis
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A major sovereign default crisis is looming for the so-called developed economies of the world. The result will be a major redistribution of economic wealth and an overhaul of the international financial system on an epic scale. Investing in the Age of Sovereign Defaults: How to Preserve your Wealth in the Coming Crisis explains what lies ahead, and offers invaluable suggestions to help investors avoid massive losses.
Explains why the West is headed for a major default crisis and how investors can protect themselvesContends that the value of gold will continue to rise and that sooner or later government debt, including that of the U.S. and Japan, will be shunnedWritten by investment experts Peter Treadway and Michael WongThe days of the economic status quo are coming to an end. Investing in the Age of Sovereign Defaults shows investors what's coming and what investors must do if they want to escape unscathed.
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DR. PETER T. TREADWAY is an independent consultant and money manager. He is currently principal of Historical Analytics LLC, a consulting/investment management firm dedicated to global portfolio management. From 1965–2000, Treadway had a distinguished career on Wall Street and with major American financial institutions. He was ranked as an "all star" analyst eleven times by Institutional Investor. Treadway holds a PhD in economics from the University of North Carolina at Chapel Hill, an MBA from New York University, and a BA in English from Fordham University in New York.
DR. MICHAEL C. S. WONG is the founding President of CTRISKS, a credit rating agency and risk-consulting firm based in the Greater China region, and an Associate Professor of Finance at the City University of Hong Kong. Dr. Wong is the Hong Kong Regional Director of the Global Association of Risk Professionals and was a founding member of the FRM Committee of the association from 1998–2002. Prior to his career in academia and consulting, he was involved in investment banking. Dr. Wong graduated from the University of Cambridge, University of Essex, and the Chinese University of Hong Kong.
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Acknowledgments xi
Preface xiii
Chapter 1 Democracies’ Fatal Attraction of Populism 1
Default, an Expanded Definition 2
Debt Default in History—A Recurring Theme 3
Nobody Likes a Lender 4
Populism, Democracy, and the Road to Default 9
The Demographics Are Awful 14
The Special Roles of the United States 15
Universal Suffrage—The Holy Grail or the Villain? 16
Universal Suffrage—The American Story 18
Rational Economic Man? 20
Irrational Voters? 22
Is a Meritocracy Good for Everyone? 23
Do We Want a Meritocracy? 24
Public-Sector Unions—We Vote for You, You Reward Us 25
Debt and Macroeconomics 27
Hyman Minsky: Another View of Debt and Macroeconomics 29
Culture Counts 31
One Note of Optimism 32
Chapter 2 The Sorry Fiscal State of the Advanced Countries 35
Sovereign Debt/GDP 36
Outlook for the United States 39
Dismal Demographics 41
Race and Ethnicity—An American Complication 43
Unfunded Entitlements and Dismal Accounting 44
And Then There Are the American States 52
The Ownership of US Government Securities 53
If Something Cannot Go on Forever, Then It Will Stop 53
Europe—The Default Process Has Already Begun 54
The Euro—What Should Have Been 57
The United Kingdom—Not a Euro Country 64
Japan—The Enigma 65
Chapter 3 A Diversion to India and China 69
India—The Democratic Surprise 69
China—Not a Democracy, Populism Less of a Problem 74
Chapter 4 The International Monetary System—In Desperate Need of Repair 83
Let’s Start with History and Economics 84
The Gold Standard in Theory—The Price-Specie Flow Mechanism 86
The Sad Evolution of the International Monetary System 89
The International Monetary System Must Change—But to What? 97
Chapter 5 The Road to Worthless Paper Money 105
China—The Birthplace of (Worthless) Paper Money 106
A Persian Diversion 108
The American Story—“Honest Abe” Prints Some Money 108
German Hyperinflation—Is This the Prototype? 110
Modern Inflation 113
Are We Really in Deflation? 113
Measuring Inflation—Are the Numbers Really Higher? 114
Chapter 6 An Overall Assessment of the Current Investing Scene 119
The Bad News 120
The Good News and Some Long-Term Trends (Which Are Mostly Good News) 122
The Unknowns 123
Supply-Side Reforms Must be Enacted 124
Taxation—Americans versus Everybody Else 127
Chapter 7 Investment Survival in the Age of Defaults 131
Asset Classes for Investment Survival 132
Fixed-Income Securities 153
European Equities 154
What about American TIPS? 155
Gold—Don’t Get Carried Away 155
Commodities/Resources—Not a Simple Story 158
Selected Big-Cap Nonfinancial, Global Companies 159
Large Global Banks—Avoid 161
Equities from Selected Emerging Markets 168
Appendix A A Quantitative Approach to Sovereign Risk Assessment 177
About the Author 209
About the Contributor 211
Index 213
