Sunday, February 15, 2009

More toxic assets in EU

£16.3 Trillian

You know what that means? More borrowing, even worse credit sentiment toward these nations' treasury securties. Countries like Italy and UK have taken it pretty hard as it is, now we know it's worse.

The next logical question would be, how does one exploit this information for profit?

The EU banks will demand more "bailout" capital from respective governments, who raises it by further borrowing. As debt (supply) grows, investors will demand higher interest rates, therefore inflation will likely jump on the upside. It's either that or taking loss of power for existing economic, political structure.

So, in the interest of existing bankers and politicians, an accelerated inflation will likely unfold. Plenty of investment vehicles have high correlation to the rate of inflation, commodities, interest rate futures, or even real estate (but I would not advise it).

Oh yeah, the point remains, EU's kinda screwed.

0 Reflections: