Wednesday, March 28, 2012

In the end, the laws of economics prevail

This is not the first time that Greece has had to restructure its debt. Since 1800, Greece has spent roughly 50% of its time in default or debt rescheduling and Spain has spent approximately 23% of its time in default or debt rescheduling. At one time, we were led to believe that only emerging third world countries default on their sovereign debt, not long established democracies with duly elected governments and modern economies. In the end, the laws of economics prevail. If you have profligate spending, irresponsible government, high debt levels relative to the GDP, there comes a tipping point when economic reality sets in.
Source: Chou Funds 2011 Annual Report