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Today’s Market Meltdown Is Due to Europe’s House of Cards

Posted by Larry Doyle on May 4, 2010 10:33 AM |

Thanks to 12th Street Capital for bringing my attention to Europe’s Web of Debt highlighted the other day in The New York Times. The tangled web of interconnected liabilities is only exacerbated by exposures in the credit derivatives market. This situation is very similar to the interconnected Wall Street meltdown in 2008. Think of Greece as Bear Stearns and Spain as Lehman for example. (The image below is too large to fit in the allotted space on this site, so click on the image to view its entirety.)

Banks and governments in these five shaky economies owe each other many billions of euros — converted here to dollars — and have even larger debts to Britain, France and Germany. Arrow widths are proportional to debt amounts.

Today’s market meltdown is directly related to this tangled web.


  • Fred

    Hey LD

    What the web doesn’t depict is that when everything is all “netted out”, everyone ends up owing GS everything; but not to fear, all the debt has been insured by AIG.

    • LD


      Ha ha…I think you are probably right. I could make a few other applicable comments but this is mostly a family site so I’ll leave them out.

  • Bill Bengen

    The accompanying chart can be
    interpreted in several ways. I see
    5 Enterprise-class starships girding
    for battle with a new Borg ship, not a
    cube, but a pentagon. The suggests
    involvement by the US Defense Dept.
    Apparently the implications of the
    European sovereign debt situation
    transcend earthly bounds. Engage!

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