From Volume 38, Issue 32 of EIR Online, Published August 19, 2011

Global Economic News

German Economist: 'Speculators Bet on Apocalypse'

Aug. 11 (EIRNS)—German sovereign debt began to come under direct speculative assault this week, as risk premiums on government bonds have risen over recent days, due to derivative speculation on credit default swaps (CDS). An article in the Aug. 11 Handelsblatt, based on an interview with Gustav Horn, the director of the Institute of Macroeconomics and Economic Research (IMK), rang the alarm bells:

Handelsblatt explains that the "Euro crisis is capturing ever more countries and pulling them down into the maelstrom.... The crisis is further aggravated through speculative investors who bet on the collapse of states and banks."

The article then quotes Horn attacking CDS trading as "mean casino gambling, which has to be banned." It continues:

"'When panic rules, reason stops, because these CDS are basically bets on the apocalypse,' says IMK head Horn. If the federal government [of Germany] as well as the French government should not be able any more to refinance its debts, that would mean that almost any government, including the U.S. and Japan, are already bankrupt. 'You don't need a lot of fantasy to predict that this would mean the total collapse of the financial markets,' says Horn."

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