Bond Vigilantes Set Sights on Sovereign Debt

Seeking Alpha ^ | February 25, 2010 | Gary Dorsch

[george76]

The collapse of Lehman Brothers ...triggered one of the biggest corporate debt defaults in history, and also ignited the biggest stock market meltdown in decades. When the smoke had finally cleared, Lehman’s bonds attracted bids of 8 cents on the dollar, resulting in staggering losses of $365 billion.

Worse yet, about 350 banks and investors were thought to have insured $400 billion of Lehman’s bonds through complex derivatives, known as credit default swaps (CDSs), causing even deeper losses and mayhem in the markets. A fifth was wiped off London Footsie shares. In Tokyo the Nikkei-225 index lost 10% of its value in a single week.

The world’s wealthiest nations responded to the crisis, acting in solidarity, with a rescue package of $12 trillion, equal to a fifth of the entire world’s annual economic output.

In order to finance the rescue operation, and prevent a second “Great Depression,” the G-20 issued an avalanche of debt, equal to 10% of their combined GDP in 2009, − the biggest since the Second World War. The IMF now calculates the G-20’s debt will reach 118% of GDP in 2014...

Essentially, the British and US governments bankrupted their national treasuries

[Leisler]

""How did you go bankrupt?" "Two ways, gradually and then suddenly."
from The Sun Also Rises by Ernest Hemingway

[screaminsunshine]

Better go get some mutual funds. This should make the Stocks go through the roof!