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So what do we really mean by default? |
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09 May 2011 |
Justin Urquhart Stewart is one of the most recognisable and trusted market commentators on television, radio, and in the press. Originally trained as a lawyer, he has observed the retail market industry for 20 years whilst at Barclays Stockbrokers and developed a unique understanding of the market's roles and benefits for the private investor.
Justin Urquhart Stewart is one of the most recognisable and trusted market commentators on television, radio, and in the press. Originally trained as a lawyer, he has observed the retail market industry for 20 years whilst at Barclays Stockbrokers and developed a unique understanding of the market's roles and benefits for the private investor. Justin provides financial advice to clients of Kester Cunningham John Financial Planning LLP.
After a week when we have been through another political charade around the sovereign debt issues, there at last seems to be a realisation that something is going to have to give. The term default is obviously unacceptable to the authorities, but it of course can take many forms. Actual default implies an aggressive 'can't pay, won't pay!' attitude. The reality will be an adjustment and rescheduling of the debt over an extended period of time. However, defaults come in other colours as well.
These could include devaluation of the currency and of course the erosion to the value of the debt via inflation. On that basis one could argue that by devaluing the dollar so much, the US has already in effect defaulted on its creditors. Equally the UK is achieving the same; with real inflation around 5% we are eroding around |
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