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Investing in the Age of Sovereign Defaults. How to Preserve your Wealth in the Coming Crisis

  • ID: 2292906
  • Book
  • March 2013
  • 320 Pages
  • John Wiley and Sons Ltd

Praise for Investing in the Age of Sovereign Defaults

"Peter T. Treadway presents a comprehensive, but disturbing reality: rich nations are not immune to fiscal disaster. In fact, they are vulnerable and past Black Swans may easily repeat in a future built on fiat money and excessive spending. For investors, the prospects of deflation, inflation, and worthless paper money raise troubling questions. But in the likely future of default by so–called rich nations, Treadway lays out strategies to preserve assets and survive the worst of an otherwise bleak financial trend. This is a must–read for any thoughtful investor."
MICHAEL C. THOMSETT, author, educator, and financial expert

"Dr. Treadway′s series of Dismal Optimist commentaries have been a mainstay for global financial professionals and high–level decision makers for years. One of the chief reasons for its popularity is his observations on financial affairs and global markets have largely been proven correct, despite the fact his views tend to be outside the mainstream. The publication of Investing in the Age of Sovereign Defaults gives everyone the opportunity to benefit from his insight supported by his financial expertise and his exceptional knowledge of history. This book is a great read and will become a valuable tool for investors, decision makers, and financial professionals. I urgently recommend it to all."
ROBERT HARDY, Principal, The Geostrat ([external URL]

"While there is no lack of individual intelligence among global policymakers, economists, and market observers on the public stage, the continuing malaise in the global economy does seem to be confounding popular understanding. In Investing in the Age of Sovereign Defaults, Peter Treadway brings decades of practical economic and financial wisdom to the current conundrum.

Treadway asks and answers the tough questions directly and with sound logic. His historical economic perspectives, worldview, and hands–on strategic market experience make this book a must–read for anyone looking to better understand economies and reflexive government policies. The book will open many eyes."
PAUL BRODSKY, co–founder and co–managing member, QB Asset Management Company, LLC

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Acknowledgments xi

Preface xiii

Chapter 1 Democracies Fatal Attraction of Populism 1

Default, an Expanded Definition 2

Debt Default in History A Recurring Theme 3

Nobody Likes a Lender 4

Populism, Democracy, and the Road to Default 9

The Demographics Are Awful 14

The Special Roles of the United States 15

Universal Suffrage The Holy Grail or the Villain? 16

Universal Suffrage The American Story 18

Rational Economic Man? 20

Irrational Voters? 22

Is a Meritocracy Good for Everyone? 23

Do We Want a Meritocracy? 24

Public–Sector Unions We Vote for You, You Reward Us 25

Debt and Macroeconomics 27

Hyman Minsky: Another View of Debt and Macroeconomics 29

Culture Counts 31

One Note of Optimism 32

Chapter 2 The Sorry Fiscal State of the Advanced Countries 35

Sovereign Debt/GDP 36

Outlook for the United States 39

Dismal Demographics 41

Race and Ethnicity An American Complication 43

Unfunded Entitlements and Dismal Accounting 44

And Then There Are the American States 52

The Ownership of US Government Securities 53

If Something Cannot Go on Forever, Then It Will Stop 53

Europe The Default Process Has Already Begun 54

The Euro What Should Have Been 57

The United Kingdom Not a Euro Country 64

Japan The Enigma 65

Chapter 3 A Diversion to India and China 69

India The Democratic Surprise 69

China Not a Democracy, Populism Less of a Problem 74

Chapter 4 The International Monetary System In Desperate Need of Repair 83

Let s Start with History and Economics 84

The Gold Standard in Theory The Price–Specie Flow Mechanism 86

The Sad Evolution of the International Monetary System 89

The International Monetary System Must Change But to What? 97

Chapter 5 The Road to Worthless Paper Money 105

China The Birthplace of (Worthless) Paper Money 106

A Persian Diversion 108

The American Story Honest Abe Prints Some Money 108

German Hyperinflation Is This the Prototype? 110

Modern Inflation 113

Are We Really in Deflation? 113

Measuring Inflation Are the Numbers Really Higher? 114

Chapter 6 An Overall Assessment of the Current Investing Scene 119

The Bad News 120

The Good News and Some Long–Term Trends (Which Are Mostly Good News) 122

The Unknowns 123

Supply–Side Reforms Must be Enacted 124

Taxation Americans versus Everybody Else 127

Chapter 7 Investment Survival in the Age of Defaults 131

Asset Classes for Investment Survival 132

Fixed–Income Securities 153

European Equities 154

What about American TIPS? 155

Gold Don t Get Carried Away 155

Commodities/Resources Not a Simple Story 158

Selected Big–Cap Nonfinancial, Global Companies 159

Large Global Banks Avoid 161

Equities from Selected Emerging Markets 168

Appendix A A Quantitative Approach to Sovereign Risk Assessment 177

About the Author 209

About the Contributor 211

Index 213

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DR. PETER T. TREADWAY is an independent consultant and money manager. He is currently principal of Historical Analytics LLC, a consulting/investment management firm dedicated to global portfolio management. From 1965 2000, Treadway had a distinguished career on Wall Street and with major American financial institutions. He was ranked as an "all star" analyst eleven times by Institutional Investor. Treadway holds a PhD in economics from the University of North Carolina at Chapel Hill, an MBA from New York University, and a BA in English from Fordham University in New York.

DR. MICHAEL C. S. WONG is the founding President of CTRISKS, a credit rating agency and risk–consulting firm based in the Greater China region, and an Associate Professor of Finance at the City University of Hong Kong. Dr. Wong is the Hong Kong Regional Director of the Global Association of Risk Professionals and was a founding member of the FRM Committee of the association from 1998 2002. Prior to his career in academia and consulting, he was involved in investment banking. Dr. Wong graduated from the University of Cambridge, University of Essex, and the Chinese University of Hong Kong.

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