The great Ambrose Evans-Pritchard of the (London) Telegraph, with whom I have had the pleasure of sharing a pint or two, explains why some governments in Europe may default under the crushing load of bank debt. His major source is Dallas hedge fund manager Kyle Bass, who has been combing through the financials of European banks:
US hedge fund Hayman Advisers is betting on the biggest wave of state bankruptcies and restructurings since 1934. The worst profiles are almost all in Europe — the epicentre of leverage, and denial. As the IMF said last week, Europe’s banks have written down 17pc of their losses — American banks have swallowed half.
Leave it to Ambrose to put this in historical context:
Great bankruptcies change the world. Spain’s defaults under Philip II ruined the Catholic banking dynasties of Italy and south Germany, shifting the locus of financial power to Amsterdam. Anglo-Dutch forces were able to halt the Counter-Reformation, free northern Europe from absolutism, and break into North America.
Bass’ fund is up 340% since inception and was up 6% in 2008.
