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Sovereign Debt Crisis Worsening

March 21st, 2010

For more than a year, I have been warning in my blog of the acute risk to the global economy stemming from out of control public spending in major and advanced economies. My new book , “Global Economic Forecast 2010-2015: Recession Into Depression,” amplifies my warning  with data  and trend analysis. The bottom line in my forecast: the current level of public debt and deficits in large economies, in particular the United States and United Kingdom, is unsustainable, and will inevitably lead to a profound sovereign debt implosion, sparking a synchronized global depression (my book is available on Amazon.com, can be downloaded as an Amazon kindle, or can be purchased directly from this website, http://www.globaleconomiccrisis.com). Now, a growing chorus of authoritative figures in the world of economics and finance are echoing my warnings.

As reported in Bloomberg, the International Monetary Fund’s first deputy managing director, John Lipsky, speaking at the China Development Forum in Beijing, said “this surge in government debt is occurring at a time when pressure from rising health and pension spending is building up,” leading to major economies being confronted with “acute” fiscal challenges. The IMF official warned that even if these countries exit from their so-called economic stimulus measures, this won’t even come close to confronting their growing public debt gap.

Lipsky’s remarks follow on the heels of another bleak warning that emerged from the co-chief investment officer at Pimco,  Mohamed El-Erian, which I reviewed in a previous post.  He spoke frankly of the danger that sovereigns will attempt to inflate away their excess public debt, or even default.

When  individuals of the rank of  Mohamed El-Erian and John Lipsky discuss openly, on the public record, the alarming growth of public indebtedness, then only an ostrich can conclude that there exists no sovereign debt crisis.

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