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

Table of Contents:
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

About the Author :
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.