2013-01-24zerohedge.com

The correct bet of last year was certainly on the side of the central banks but the correct bet of this year may soon turn out to be on the side of the consequences of their actions. There is no sheet of paper, no matter how thin, without two sides; no coin without a heads and a tails and no action, as Newton correctly remarked, without a reaction.

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So the next crisis, the sovereign debt crisis, will occur when some country's debt cannot be paid and when some funding country refuses to accept the bill for their own citizens. The yield on anyone's debt, first dismissed by the EU as unfair and now heralded as a sign that things are improving, is little more than a charade of masks. The yields have fallen because of the free-flowing paper that must be parked somewhere. Yet whether the yield is 4.00% or 7.00% if the principal cannot be re-paid then the coupon is of little consequence.


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