Wednesday, 03 October 2018 11:06

How the New Doom Loop May Sink Markets

Written by
Rate this item
(0 votes)

(New York)

Have you heard of the new “doom loop”? The term may seem vaguely familiar, and follows in a long line of sensationalist financial terms. Just like in its origin during the European debt crisis, the term once again refers to a European state sinking under the crushing weight of its own debt. You guessed it, Italy. The doom loop refers to the European bank habit of loading up on sovereign bonds, and in turn creating a negative reinforcment cycle where bonds fall in value, which leads to serious concerns over a bank meltdown, which then exacerbate the original economic fears. That is exactly what is now occurring after Italian bonds sold off steeply following the country’s wild budget approval.


FINSUM: Italy is one of the very largest debt markets and economies in the world, and a full scale meltdown there would surely impact global markets, even the Teflon-coated US stock market.

Contact Us

Newsletter

Subscribe

Subscribe to our daily newsletter

Top
We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…