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Investing in the Age of Sovereign Defaults: How to Preserve your Wealth in the Coming Crisis

Investing in the Age of Sovereign Defaults: How to Preserve your Wealth in the Coming Crisis

Peter T. Treadway, Michael C. S. Wong (Contributions by)

ISBN: 978-1-118-24722-8

Dec 2012

320 pages



Acclaimed investment experts Peter Treadway and Michael Wong explain how to protect your investments—and even profit—from the coming sovereign default crises

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 themselves
  • Contends 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 shunned
  • Written by investment experts Peter Treadway and Michael Wong

The 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.

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