Tuesday, 30 March 2010

Australian Review of Fire Force

There's a great review of Fire Force in the Sydney paper, the Manley Daily. "It begins with a sensational prison break, and builds up a frantic pace". Great stuff. You can read the whole thing here.

Monday, 29 March 2010

How Risk Got Turned Upside Down...

In my Money Week column this week, I've been discussing how accepted ideas of financial risk are getting turned upside down. Here's a taster....

Every investor who has ever filled in one of those seemingly pointless ‘know your customer’ forms churned out by the bank or their stockbroker will be familiar with the way they have to tick a box describing their appetite for risk as high, low or medium.
We all think we know roughly what it means. Say you are low risk, and you’ll be offered some bank deposits, occasionally spiced up with a few gilts. But describe yourself as high-risk, and you’ll be offered a diet of Vietnamese software companies, Nigerian bonds, and Kazak yak hide futures.
That, however, is based on a spectrum of risk that is accepted right across the financial markets. At one end, there is a set of ‘safe’ investments: developed market equities, government debt, the dollar. At the other, there is all the flaky stuff: emerging markets, corporate bonds, commodities. How investors perceive and classify those different types of assets determines how money gets allocated around the world, and how much is charged for it. As a rough rule of thumb, the ‘safe’ assets get lots of money cheaply. The risky ones, much less, and have to pay more for it.
But what if that gets turned upside down? There is a good case to be made that everything the markets have traditionally thought about risk is about to become redundant. The flaky stuff has started to feel secure. The solid assets are looking a bit flimsy.
Let’s start with equities. Plenty of analysts have started to argue that the emerging markets are a lot safer right now than the traditional developed bourses. “While many Developed Markets are witnessing rapidly rising public debt, large fiscal deficits and slower growth, most top-tier Emerging Markets weathered the global crisis much better in terms of public-debt sustainability and the short to medium-term growth outlook,” argued Deutsche Bank in a research note this month.
Indeed so. The developing countries of Asia, Eastern Europe and Latin American look in far better shape than the old industrial giants of Europe and North America. Their economies are growing a lot faster. With the exception of Russia and parts of Eastern Europe, they have far better demographics. And they are in much better fiscal shape.
Of course, there are caveats. They have shallow and sometimes untrustworthy capital markets. They don’t have much in the way of experience. Nobody is sure if they trust the legal systems. Those are all reasons to be cautious. Still, it is looking increasingly odd to regard India as high-risk compared to Spain, or to view Vietnam as dodgier than Greece. On balance, there is a compelling argument that what’s risky has been turned upside down. Indeed, investors appear to have already recognised that, piling into the emerging markets far more enthusiastically than Europe or the US.
The same could soon happen to bonds. Government securities have always been regarded as safe, compared with corporate bonds. And the bigger and richer the country issuing them, the ‘safer’ they are rated.
But does that really make sense any more? Governments have run up massive debts, and show little sign of recognising the need to bring them back under control. Plenty of people are now reckoning in the prospect of default, either blatantly, or covertly through letting inflation rip. It’s certainly possible. Beyond about 100% of GDP it becomes virtually impossible for a government to pay off its debts either through growth or higher taxes, and plenty of governments are getting close to that. Some are way past it.
So who would you rather lend money to, BP or the British Government? One has tons of oil in the ground, and decades of experience of refining and distributing it. The other has a mass of liabilities, a spendthrift government, and a stagnant economy that is already taxed up to and beyond its ability to pay. In reality, corporate bonds may very soon look like a safer bet than government bonds.
How about currencies? The dollar has, for decades, been reckoned to be the most rock steady of safe assets, the ultimate haven. It was closely followed by the euro and the yen. And whilst those are all big currencies, backed by massive economies, it’s hard to believe they will be ‘safe’ over the next decade. The dollar and the yen suffer from massive fiscal deficits. With the growth of new economic powers, they will inevitably dwindle in importance. It is hard to see other currencies taking the place – not, at least, unless the Chinese decide to up the status of the yuan. But commodities could easily replace them. Gold would be the most obvious candidate. But oil could do the job just as well, or else a basket of industrial minerals.
The important point is that in every area of the markets, old ideas about risk are being turned upside down. That has two important implications.
The first is that is will change the price of everything. The riskier the investment, the higher the premium usually demanded to put money into it. So once your risk assessment changes, it follows the price of everything changes as well. Emerging markets will become more expensive than developed ones, corporate bonds pricier than government debt, and so on. As an investor, you don’t want to get caught on the wrong side of that shift.
Next, the flow of money changes as well. Traditionally, more money goes to the ‘safe’ assets, less to the ‘risky’ ones. So that is going to change as well. Everything we used to regard as risky will be drowning in cash. All the old ‘safe’ assets will be desperately short of it.
Once that trend gets established, it may well be unstoppable. And, by 2020, if you tick that box describing yourself as risk averse, you should expect your broker to offer you some Indonesian equities, some telecom bonds, and some oil futures – with, possibly, a few high-risk German government bonds or American equities thrown into the mix just to spice it up a bit.

Thursday, 25 March 2010

Writing A Short Story

I’ve just been writing a short story for the Red Bull magazine that goes out with The Independent. Funnily enough, despite having written quite a few novels, both under my own name, and under other people’s, I found it really difficult to get started.

A lot of people graduate from short stories to novels, but it is quite hard to go the other way. I’m used to the flow of a novel. I have the structure pretty much hard-wired into my brain. I know when to speed up, slow down, how to develop the characters, and so on.

But a short story is 2,000 words. It’s hardly any space at all to get a story started, never mind finish the whole thing. It’s more like an anecdote than an adventure.

Anyway, in the end I think I did ok.

But it was a very steep learning curve.

Tuesday, 23 March 2010

Blame The City For EMI's Decline....

The decline of the record label EMI is usually put down to the problems in the music industry. But really it is the City that is to blame, as I explained in my Money Week column last week. Here's a taster....

It is hard to know how much longer the record label EMI can stagger on under its current management. Every week seems to bring more bad news: selling the legendary Abbey Road studios to raise cash: replacing the chief executive: and losing a legal battle with Pink Floyd over whether it can sell single tracks as downloads.
Ever since the private equity mogul Guy Hands bough the business for £2.4 billion in 2007, the business has staggered from one disaster to another. The stars are already jumping from the ship: The Rolling Stones and Radiohead, have already left, Pink Floyd and Queen are rumoured to be on the way out. The private equity investors look like being wiped out, and there are doubts about whether the company itself can survive. It may well end up being auctioned off by its bankers. Even against some stiff competition, it must unquestionably rank as one of the worst takeover deals of all time.
The slow, tragic demise of one of this country’s finest companies is regularly portrayed as an inevitable result of technological change. Faced with a generation that swaps music for free on the internet, the old record labels are doomed, runs the argument. In fact, that isn’t true. Sure, the music industry faces challenges, some of them severe. But it is the money men that are killing EMI, not the web pirates. And that is a terrible indictment of the City, and the way it operates. After all, EMI is precisely the kind of company that we should be nurturing, not destroying it. And if the City isn’t able to do that, people are rightly going to wonder what exactly is the point of our over-mighty financial sector?
Historically, EMI is one of the few British companies that has always been brilliant at riding technological change. It’s been around since the start of recorded sound (it was formed as The Gramophone Company in 1897). It virtually invented the modern pop business. Long before any of its rivals, it recognised it was a global industry, built around artists of stature. It pioneered album-orientated music, from The Beatles onwards, and was the first label to sell more albums than singles. For the best part of a century, there was very little it didn’t know about getting ahead of the curve. When something new came along, it grabbed it, and figured out how to make money from it.
Much the same was true of the internet. EMI was experimenting with digital music when most of us were still wondering how to plug in our modem. It was the first label to make a whole album available for digital download. It turned Lily Allen into one of the first MySpace stars.
Fast-forward to today, and EMI’s core business is still in pretty good shape. It knows as much as it ever did about finding artists and selling songs. Coldplay’s Viva La Vida was the biggest selling album in the world of the last two years. It has just taken the country act Lady Antebellum to the top of the American charts. When it comes to its core business, EMI is still pretty good at doing what it’s always done.
Nor is the record business in the crisis that is sometimes portrayed. Last year single sales – that is, paid for downloads – soared 33%, to an all-time high of 152 million units in the UK. Ringtones are a whole new vast business. Album sales are down a bit, but only from 133 million in 2008, to 129 million in 2009, hardly a catastrophic fall. The overall value of the music industry actually rose by 4.7% in the latest annual figures from the Performing Rights Society. It’s an industry facing change, true. But it’s hardly terminal.
Its rivals prove that. Warner Music, like EMI, has seen a hit. But it is still a profitable company. Its shares have tripled in the past year. Universal Music Group, the world’s largest label, owned by France’s Vivendi, made 580 million euros last year, and pushed up profits by 11% in the latest quarter. If they can do it, why can’t EMI.
Because, instead of focussing on its main business, the company has been wheeler-dealing. As early as 2000 it planned a merger with Warner. It had another go with Warner in 2002, and when that failed again, tried to merge with Bertelsmann in 2004, before finally giving up the attempt to stay independent and selling itself to Hands’s Terra Firma in 2007.
The City kept pressing it for deals. It wanted a merger to boost the share price, and to allow it to strip out costs, and keep the profits steadily ticking upwards. But mergers are an irrelevance when your whole industry is being re-invented. It doesn’t make any difference how big you are, and cutting costs it’s rarely the way to keep the artists happy. All it does is keep you from concentrating on what the company should be doing to survive and prosper.
Private equity ownership has been even worse. In theory, it could have taken EMI out of the spotlight of the quoted market, and carefully nurtured it through a period of change. Instead, it loaded it up with a ton of debt, and put a group of people who nothing about the industry in charge.
In reality, the money men of the City have taken one of the UK’s most successful companies, a key player in one of our most promising industries, and turned it into a complete dog’s breakfast.
A financial market is meant to provide the capital to allow companies to grow, and to share ownership among a wide group of people. It should be a mechanism that helps encourage a healthy, balanced, creative economy. The lesson of EMI is that the City, for the last decade, has been completely failing to do that. Not only does the City consume vast public subsidies, and pay itself vast bonuses, it can’t even keep alive British companies. If that carries on, it is going to be very hard for people to see the point of it.

Thursday, 18 March 2010

Finishing A Book....

I haven't posted here for a bit because I've been through that annual bout of angst and exhausation known as finishing a book. I finally handed in 'Shadow Force' to Headline last week. No idea what they think of it yet. It seemed pretty good to me, but then you never really know....
One thing struck me as interesting. I have a strange reluctance to actually finish a book. I completed the first draft in January, then spent ages flaffing around, making small changes, tweaking lines, trying to iron out the typos. But I came away with the distinct impression I was reluctant to finish the thing.
I wonder if all writers experience that. It wouldn't surprise me. Finishing a book is a psychological hurdle that needs to be cleared much more than starting one. Up until, that point, you can always fiddle around, change things, fix things. But once it is in, it's in. There's nothing much you can do. You go from having total control over the manuscript to almost none. Scary.
And then of course there is the whole business of what people will think of it.
In fact, all that considered, it's amazing I got it in at all.

Wednesday, 17 March 2010

My Finances...

In the rather unlikely event that anyone is very interested, The Independent has been giving me advice on my finances. Good picture of Death Force, though. You can read the piece here.

The Lessons From The Dot Com Crash

In my Money Week column last week, I was looking at the lessons to be learnt from the dot com bubble ten years on. Here's a taster....

Ten Years On, Investors Should Make Sure They’ve Learned The Right Lessons From the Dot Com Bubble:

It is a statistic to make any investor feel sober. On March 10th, 2000, the Nasdaq index in the US hit the giddy heights of 5,132. Dot come mania was at its peak, and the key American technology market just kept on soaring.
Until, like all bubbles, it suddenly burst. After reaching that peak, the Nasdaq went into a steep decline that made even the drop in the Japanese Nikkei index in the 1990s look relatively benign by comparison. By 2002, it had plunged all the way back down to 1,300 wiping out three quarters of its value in around eighteen month. The dot com bubble, of which the Nasdaq was always the best measure, had well and truly burst.
A decade on, what should investors learn from that?
Two lessons are important. That bubbles, for all the madness and hype that gets associated with them, usually contain an important grain of truth. And that just because something is over-hyped, it doesn’t mean you can afford to ignore it – a lesson that clearly applies to China and the rest of the BRIC economies right now.
The dot com bubble was one of the greatest investment manias of recent times. Future economic historians will no doubt cast it along with Dutch tulips as one of the best examples of a capitalist system going completely haywire.
And, in truth, there was a lot of madness around. For a time, it seemed like any vaguely plausible young man or women, with smartly pressed chinos, an open-necked shirt, and a convincing patter about ‘eyeballs’, ‘land grabs’ and ‘first-mover advantages’ could load themselves up with a few million in venture capital, and turn that into an IPO a few months later. Mundane matters like actually having any revenues, or indeed any real knowledge of how to build a website, could be conveniently forgotten. In the ‘new economy’ everything seemed possible.
It is no great surprise that many of the dreams turned to dust. Investors, inevitably, lost a huge amount of money. And yet, looking back with the perspective of a decade, it is striking not just how crazy it all got, but also how much truth there was in many of the claims made at the height of the bubble.
The internet genuinely was a disruptive technology. Take a look at the way that newspapers are starting to close around the world. Observe the plight of once mighty record labels like EMI. Scan your high street for a CD store, a bookshop, or a travel agent. They are all gone. Big industries have been consigned to history. Others have been changed completely. Nor has the process stopped. Internet-enabled mobile are only just starting to reach the mass market. Plenty more industries will be changed forever before the impact of the web has played itself out.
Likewise, it really was a ‘land grab’. Want to launch a web book store against Amazon, an auction site against E-Bay, or a search engine against Google? Forget it. Those companies completely dominate their space, brushing aside all competitors. They will be the great monopolists of the twenty-first century – and precisely because they got in their early, and, if necessary, spent big money to establish themselves.
The only thing the evangelists for the ‘new economy’ really got wrong was the timing. It all took a bit longer than they predicted – and even on that they were only out for by a few years.
In reality, the dot com boom was more like the railway boom of the 1880’s or the mania for electrical stocks in the 1920s, which led up to the great crash of 1929, than the tulip craze. Railways had a huge economic impact. So did electricity. Just like those bubbles, the dot com boom took something of genuine importance, and magnified it to ridiculous proportions.
There is an important lesson in that for investors.
Take a look around the world right now and there are plenty of bubbles. British house prices, for example. Or government bonds. Or equities in China, or any of the other emerging markets giants, such as Brazil, Russia and India.
Some of them are just bonkers. It is hard to see why British house prices are higher than they were before the credit crunch hit – when they should be much lower. It is equally hard to believe that it makes sense to lend money for ten years to a practically bankrupt Spanish or Italian – or indeed British - government at rates of around 4%.
Those are just bubbles. You don’t want to go anywhere near them.
But the BRICs? That’s different. Sure, it’s hard to value stock accurately in China. We’re not sure we really believe the growth figures the government in Beijing publishes, never mind the price earnings ratios that appear on the Shanghai bourse. We have no real idea whether Brazil can grow in the next decade the way it did in the last, whether Russia is at long last a stable democracy, or whether India can complete the journey to modernity. We may well look back on the mania for the BRIC stock markets in 2020 and wonder what on earth we were thinking.
It is however unlikely we won’t think anything of significance was going on. In truth, the BRIC economies have passed the point of no return. They may not turn into Switzerland in the next decade, but they are too far along the path of industrialisation to go back to being agricultural, resource economies. With combined populations of 2.8 billion, that is going to have a massive impact on the global economy.
They key lesson is very simple. Don’t get fooled by the bubble. But also don’t get blinded by the fact it’s a bubble into thinking that nothing of importance is happening. The lesson of the dot com bubble – like the railway and electrical bubble before it – is that just because a trend is oversold, it doesn’t mean it isn’t significant. And right now, that is most obviously true of the BRICs.

Monday, 8 March 2010

A Sterling Crisis...Bring It On.

In my Money Week column this week, I'm arguing that a sterling crisis is the best thing that could happen to Britain. Here's a taster....

First Greece, now Britain. As the markets wait to see whether the Germans and the French will bail-out the weakest of the euro zone countries, currency traders are already turning their guns onto the next country with a massive fiscal deficit, a huge trade gap, and no clear plan for bringing its finances under control.
A full-scale sterling crisis is now a real possibility. That, however, is to be welcomed. There is a collapse of confidence in the pound every ten or twenty years. It happened in the 1960s, the 70’s, the 90s, and its happening again now. In each case, it was the catalyst for a break with a failed economic consensus. As it was then, so it can be now. Only one thing will cure the UK of its addiction to piling up more debts, printing money, and believing that it can simply spend its way of its problems, with hardly any pain – and that’s a full-scale rout in the currency markets.
Nobody can have failed to notice the way that sterling has dropped in value over the past two years. From a high of more than $2 to the pound, it has plunged back through $1.50, re-visiting the lows it visited in the immediate aftermath of the credit crunch. Against the euro area – with which the bulk of British trade is conducted – the decline has been just as dramatic. When the single currency was launched, a pound bought you around 1.7 euros. Now it is 1.1, and parity may well be not far away. As anyone who has gone abroad in the past year will know, our money is not worth much any more.
It isn’t about to recover any time soon. The index of wagers against the pound by hedge funds and other speculators is at a decade high. Investors are betting big the pound is going to fall a lot further.
The reasons for that are perfectly straightforward. The UK has one of the largest budget deficits in the developed world: at more than 12% of GDP, it is as big as the Greek deficit, and wider than the Portuguese or Spanish. The recession has been as deep here as anywhere and the recovery pitiful.
More seriously, the British show no willingness to tackle their problems. The Irish are getting to grips with their deficit. The Greeks are being forced to get their spending under control. The UK has been propped up by the prospect of a change of government in a May election. But with the polls narrowing, that no longer looks like the certainty it once was. And even if the Conservative Party does manage to win the election, it is far from clear that David Cameron’s government will have the kind of public support needed to slash 10% to 15% from public spending.
Increasingly, the UK looks like it might be the Lehman Brothers of the rolling sovereign debt crisis. It isn’t small enough to be easily rescued, like Greece. Nor is it too big to fail like Japan and the US. It is precisely the right size for the markets to make an example of it.
It’s sometimes argued the UK can’t have a sterling crisis, because we have our own floating currency, and our own central bank. The markets may well push sterling down, but since Britain doesn’t target any particular rate, it doesn’t matter very much. Indeed, the more sterling falls, the sooner an export-led recovery can get started.
Dream on. If you think the markets can’t punish you, you are living on fantasy island.
The UK is critically dependent on foreign money. We don’t begin to save enough to finance our massive budget deficit. Of the outstanding stock of government debt, £200 billion is held overseas, and that’s even after the Bank of England started buying all the gilts it could get its hands on. You can’t just print money to fund the deficit in perpetuity, nor can it be bought by British investors, because we don’t save enough. It has to be funded abroad – but no one will want to buy gilts in a fast depreciating currency.
And the UK has a massive trade deficit. We import most of our manufactured goods and much of our food as well. Even the oil is running out: for the last five years, Britain has been a net importer of oil and gas. If sterling falls too far, the cost of everything we import will soar, creating a big spike in inflation. Again, you could just ignore it. But your run the risk the rest of the world will just stop accepting your money. At a certain point, the Bank of England would be forced to jack up interest rates to defend the pound, pushing the economy back into deep recession.
Britain has a long history of sterling crashes. In 1967, the Labour Government of Harold Wilson was blown off course when it had to devalue the pound against the dollar. In 1976, the IMF was called into bail-out a country close to financial collapse. In 1992, the UK was forced out of the European exchange rate mechanism as the cost of shadowing the deutschemark became too high.
Each crisis had one thing in common. It blew apart an economic consensus. In the 1960s, we thought we had to maintain sterling’s role in the world, in the 1970s we thought we could only manage the economy by appeasing the unions, and in the 1990s we believed we had to link our monetary policy to Germany’s, whatever the damage inflicted on our economy.
In each case, the consensus was wrong. It took a sterling crisis to change it. But once it changed, the country could start to recover.
And now? The consensus is that the government must keep spending, and the Bank of England must keep on printing money, for the country to recover. An endless succession of economist keep telling us that we can’t the deficit too quickly, and that if ‘quantitative easing’ isn’t working, that just shows we need more of it.
It’s nonsense, just as pandering to the unions was in the 1970s, and tying the pound to the deutschemark was in the 1990s. Only a sterling crisis will force the UK top change course. Bring it on.

Monday, 1 March 2010

Sovereign Debt....Sub-Prime Mark II...

In my Money Week column this week, I've ben arguing that the sovereign debt crisis is very similar to the sub-prime crisis. Here's a taster....

How bad is the sovereign debt crisis going to get?
On the surface, the rising tide of government borrowing needn’t necessarily be catastrophic. After all, even with epic, Gordon Brown-style mismanagement, it’s pretty hard for governments to go bust: they can always just raise taxes to pay off their debts. And there is a queue of Keynesian economists to tell us cheerfully that all the money spent on ‘stimulus packages’ will make the economy grow faster, and so pay for itself in higher tax revenues.
But three factors have the potential to turn this from a serious but containable problem into a full scale crisis: contagion from one country to another; the greed of the financial system; and, perhaps most seriously the dishonesty of both the governments and banks involved in covering up who owes how much to whom.
Indeed, the closer you look at it, the more it looks like a replay of the sub-prime crisis that froze the financial system two years ago.
Start with contagion.
The sub-prime crisis started with some problems in the housing market. By itself, that shouldn’t have been a huge problem. It didn’t end there, however. It quickly spilled over into the bond markets, the derivatives markets, and finally the banking system, until it had become a full-scale financial crash.
The same is happening with sovereign debt. It might have started in Greece, but attention quickly turned to the other so-called PIGs: Portugal, Italy, and Ireland and Spain. Now it is shifting to Britain. Yields on UK government debt are already higher than Spain or Italy, an unprecedented humiliation (Italy, after all, always used to be a by-word for fiscal irresponsibility). Soon it will turn on Japan and the US. The problem just spreads and spreads.
Next, greed.
The financial markets have got used to an endless succession of free lunches. Banks invested in bonds issued by Greece, Portugal, and Spain, even as those countries racked up huge debts, because they assumed they were just as safe as paper backed by the German or French government. They thought they could pocket the extra yield, without having to shoulder any significant risk that they wouldn’t get their money back.
Now that it turns out that the higher yielding assets were - surprise, surprise - a bit riskier as well, the markets are clamouring for a bail-out. But the European Union treaties explicitly prevent the debts of one euro member being re-paid by another.
Just as in the sub-prime crisis, the greed of many investors for higher yielding assets led them to take too many risks. They got burnt on sub-prime mortgages, and now they are getting burnt on sub-prime sovereign debt as well.
But the most worrying comparison between the two crisis’s is dishonesty.
One of the main reasons the sub-prime debacle turned from a relatively containable problem in the American housing market to a global financial meltdown was the widespread fiddling of the figures. Dodgy loans to people with poor credit ratings, and not much income, were rolled up into complex financial instruments, stamped triple A by the ratings agencies, then sold on to people who didn’t really understand them.
In the end, no one knew who owed what to whom. No one trusted anyone. The result? The system froze up.
Exactly the same is happening with the sovereign debt crisis.
We now know, for example, that the figures the Greeks used to get into the euro were largely fiddled. But, even worse it turns out the banks have been complicit in hiding the extent of the Greek government’s borrowing. At least 15 securities firms, including Goldman Sachs, were involved in creating complex ‘swap’ instruments that allowed the Greek government to defer interest payments until later years, and so hide yet more borrowing under the carpet. At the insistence of the Germans, the EU is now investigating.
The trouble is, that kind of creative accounting has been going on everywhere. The Italians pulled similar tricks to help massage their borrowing figures, often by swapping Italian debts into yen. Meanwhile, the ratings agencies have hardly covered themselves in glory. They have downgraded Greece, but probably not to the extent that they should. It is shocking that they haven’t downgraded the UK yet, and it is hard to believe that the only reason they haven’t is because they don’t want to offend the British government (a significant customer, let’s remember). No one really believes that the UK is a triple A rated borrower anymore – if they did, why do the markets put a higher price on McDonald’s debt than the British gilts?
Likewise, in this country, as we know, huge tranches of government debt have been shifted off-balance sheet. The private finance initiative has become a vehicle for concealing how much the government is really borrowing. Pensions obligations are left entirely unfunded, for the simple reason that putting a cost on them would reveal how much the government will have to raise going forward. That is true of other countries just as much as it is true of the UK. Governments aren’t levelling with their electorates, and they aren’t levelling with the markets either.
Dishonesty is corrosive. The global banking system holds vast quantities of government paper. If it starts to suspect government debt statistics being are fudged, and the extent of indebtedness is being fiddled, suddenly no one is going to want trade it. It will be impossible to price the bonds. The whole market will freeze up.
By itself, the sovereign debt crisis would be a big enough problem. Fixing it would involve a lot of hard work, over many years. Governments would have to stop throwing money at electorates like confetti. Public sector employees would have to work harder for longer.
But add in contagion, greed and dishonesty, and it has the potential to turn into a re-play of the whole sub-prime debacle. Brace yourselves. Greece is just the start. This could soon get very nasty.