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Is the next global crisis beginning?

It’s very helpful to see this chart.

Data points like this show the extra risk that investors believe Greek debt represents.

In September, 2008 when Lehman failed the global credit markets froze. Note how that impacted the the risk premium for Greek debt.

FT Alphaville pointed to comments made by the Bank of France governor, Christian Noyer, who said on Friday that he had ‘no particular worries’ over ‘relatively small’ French holdings of Greek sovereign debt but the FT post goes on to highlight…

~~~ “For context, compare sovereign versus non-sovereign exposure in Greece, according to a WSJ report from February:

German and French banks carry a combined $119 billion in exposure to Greek borrowers alone and more than $900 billion to Greece and other countries on the euro-zone’s vulnerable periphery: Portugal, Ireland and Spain.

The global financial system is all about interconnectedness… we saw that in Bear and Lehman’s collapse… and Wall Street and policy makers have said that we need bigger capital cushions… it’s mainly been talk at this point… I noted how uncomfortable the Comptroller of the Currency, John Dugan, looked yesterday testifying at the Financial Crisis Inquiry Commission… he looked anxious to get back to his Bloomberg terminal and phone… you can only imagine how the calls are flying between central bankers, banking regulators, heads of state and large banks… they’ve been through the drill before… except now it’s nations and not just over-leveraged global trading books…

Europe has a very concentrated and undercapitalized banking system and I wonder how much regulators have a view of derivatives concentration and counterparty relationships… the proposal for a European Systemic Risk Board is not yet implemented… its the EU who is responsible for Greece’s bailout and reports say that conflicts are arising…

Buckle up… leverage in the global system is still much too high… something needs to give…