In my previous blog I mentioned a sovereign country defaulting. I was not blowing hubris. I was specifically referring to England or Switzerland. This used to be unthinkable but has quickly becoming possible and something that I added to my worry list about a month ago after reading the Centre Economic Policy Research Policy Insight - October 2008. The title of this piece was The Icelandic banking crises and what to do about it: The lender of last resort theory of optimal currency areas. It was a paper done by William H. Buiter and Anne Slbert of the Birbank, University of London back in April 2008 for Iceland. They were asked to keep it secret because of the damaging nature of the paper. Once Iceland collapsed it didn't matter anymore so they were allowed to release it. Anyway, England and especially Switzerland have the same structural problems as Iceland. If such a thing would occur it would be a depression and a gold event (in other words you would want to own gold). All these talking heads running around saying we have seen financial Armageddon would actually get to see financial Armageddon. We are along way from this but it is possible.
Below is a bloomberg article that came out today mentioning some concerns about Switzerland.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aqMuAUNshxj0&refer=home
An isolated European country with an economy geared toward finance and winter sports is no longer a monetary bastion as credit evaporates around the globe. Banks teeter, the once-impregnable currency depreciates and a proudly independent people question whether a centuries-old go-it-alone strategy can survive.
Even Switzerland is wondering if it’s immune to the forces ravaging Iceland.
and
The franc has tumbled against the dollar.
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