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Friday seen one of the worst moments of the 2008 financial crisis played out, part of the European Union defaulted on their debt and with the help of the ECB, World Bank and IMF strong armed bond holders in to accepting massive write offs.

European officials insist that Greece is a one-time deal, not meant to set a precedent for other nations. But it is easy to see that minority parties in debt-burdened European nations could find a demand for relief an attractive platform. Imposing a “tax” on bondholders rather asking citizens to pay higher taxes while public services are cut might prove popular with voters.

Demands for debt relief could take many forms. Greece has been able to encourage bond holders to participate in the debt swap by enacting laws that incorporated “collective action clauses” into the 86% of bonds governed by Greek law. These clauses allow super-majorities of bond holders to force hold-outs to participate in swaps. Other countries in the euro zone could replicate this strategy.

Given the nature of the default, and the discount many other European bonds are trading at it is time review your portfolio and cut any exposue to companies at risk due to their Euro Debt holdings.

While the World celebrated the deal for now, the reality in Greece is that the overall jobless rate rose to 21 percent from 20.9 percent in November, twice the euro zone rate.

The average unemployment rate for 2011 jumped to 17.3 percent from 12.5 percent in the previous year, according to the figures, which are not adjusted for seasonal factors.

Youth were particularly hit. For the first time on record, more people between 15-24 years were without a job than with one. Unemployment in that age group rose to 51.1 percent, twice as high as three years ago.

Budget cuts imposed by the European Union and the International Monetary Fund as a condition for saving the debt-laden country from a chaotic default have caused a wave of corporate closures and bankruptcies.

Greece’s economy is estimated to have shrunk by a about a fifth since 2008, when it plunged into its deepest and longest post-war recession. About 600,000 jobs, more than one in ten, have been destroyed in the process.

How the Euro Crisis Looks Now

Greece currently the focus of the eurodebt crisis now in its third year, looks to have managed to close on an exchange to effectively default on their national debt and reduce the 206 billion euros of privately held Greek debt by 53.5 percent.

While markets are celebrating the default the real question is, who will be next?

Italy, Spain, Portugal are all marginal economies that will contract under the new austerity sweeping Europe, and may look upon the default in Greece as an easy option to resolve their own sovereign debt issues.

ECB forecasts showed the economy could shrink by 0.5 percent this year and at best grow by a meager 0.3 percent, a slight downgrade of its previous estimate.

“Available survey indicators confirm signs of a stabilization in the euro area economy. However, the economic outlook is still subject to downside risks,” ECB president Mario Draghi said after the central bank left interest rates at 1 percent.

Greece’s largest banks, most of the country’s pension funds and more than 30 European banks and insurers including BNP Paribas (BNP) SA and Commerzbank AG (CBK), agreed to the offer.

While Greece would prefer a voluntary deal, the government has said it will use so-called collective action clauses to force holders of Greek-law bonds into the swap if the private sector involvement fell short and it got approval from investors to change the bonds’ terms. The Greek government had said it wanted participation above 90 percent and was seeking a minimum level of 75 percent.

This type of action supported by the ECB, World Bank and IMF clearly values Europe’s sovereign debt at cents on the dollar and institutions holding or invested in that debt should be writting down the valuations.

How Global Debt Looks Now

This list of countries by estimated future gross government debt based on data released in September 2011 by the International Monetary Fund is the stark reality of the value of physical money and cash assets. The figures are in percentage of national GDP.

Cash is no longer king and the value of most currencies is being eroded which means everyone must rethink their investment strategy and adjust their portfolio holdings.

While many think that if they live in the USA and earn in USD nothing will change, I can assure you that those days are over, growing world wide demand for food, energy, goods and services has an impact at all retail outlets in the USA.

Every investor, institutional or individual must now balance their portfolio based on currency exposure.

The IMF’s John Lipsky has warned that “the average public debt ratio of advanced countries will exceed 100 percent of their GDP for the first time since the war” by the end of this year, and that this debt is unsustainable, risking a new fiscal crisis for some.

The massive sovereign debt problems of the US and Eurozone also clearly run the risk of sharply increasing future inflation as their currency wars export inflationary pressure around the world.

This will result in real investment losses in long-term fixed interest bonds (as well as in cash), since debt that cannot be repaid from taxes will need to be printed by means of ever larger rounds of quantitative easing (money printing) measures.

All this simply implies an accelerating erosion of the value and purchasing power of money.

Investors can protect themselves from rising inflationary risks by investing in or gaining exposure to real scarcity, traditional safe haven assets like gold, as well as other commodities, I would include things like agricultural land and soft commodities as well.

Gross government debt in percent of GDP

Country	2011	2012	2013	2014	2015	2016
Japan	233.100	238.441	242.927	245.854	249.916	253.388
Greece	165.559	189.149	187.944	178.530	165.057	162.839
Saint Kitts and Nevis	148.917	143.663	138.453	134.267	130.062	126.560
Jamaica	143.308	138.000	129.818	118.740	97.298	90.155
Eritrea	134.417	127.619	125.063	121.276	124.636	124.599
Lebanon	126.361	125.010	124.166	124.768	126.352	128.167
Italy	121.065	121.385	120.105	118.403	116.319	114.089
Barbados	116.904	115.605	114.556	113.004	110.297	107.546
Ireland	109.273	115.433	118.303	117.662	116.132	114.305
Portugal	106.030	111.793	114.928	114.599	112.540	110.493
Grenada	101.920	104.312	105.436	106.202	102.342	98.693
Iceland	101.196	96.772	95.034	91.721	88.209	82.549
United States	100.046	105.031	108.930	111.363	113.195	115.394
Belgium	94.561	94.276	93.922	93.633	93.240	92.955
Singapore	93.470	90.062	87.799	85.286	83.133	81.704
Cote d’Ivoire	93.346	54.833	52.374	50.138	48.592	47.496
France	86.811	89.371	90.706	90.750	89.681	87.683
Guinea	85.475	82.195	85.251	90.527	64.529	52.145
Canada	84.117	84.163	82.287	79.694	76.444	72.952
Germany	82.643	81.896	80.957	79.058	77.123	75.036
Sao Tome and Principe	82.358	84.114	83.869	82.586	62.743	59.180
European Union	82.316	83.682	83.744	82.778	81.221	79.525
Bhutan	81.253	95.326	103.544	107.407	110.672	107.367
United Kingdom	80.762	84.766	85.948	85.101	83.060	80.386
Belize	79.340	77.694	76.645	75.801	75.057	74.590
Seychelles	78.790	73.396	66.872	59.802	54.880	49.338
Sudan	78.220	87.285	90.478	92.476	95.174	94.826
Nicaragua	77.415	76.037	73.874	71.975	70.062	68.129
Egypt	76.239	76.644	75.541	71.637	67.455	62.986
Hungary	76.124	75.527	75.647	74.415	73.116	71.539
Cape Verde	73.948	78.322	80.170	77.535	73.717	71.659
Zimbabwe	72.755	73.029	72.125	72.845	73.160	61.436
Austria	72.331	73.875	74.135	73.792	73.350	72.904
Israel	71.146	68.912	66.848	64.357	61.960	59.687
Saint Lucia	71.084	77.827	83.221	86.581	87.100	87.838
Saint Vincent and the Grenadines	69.484	71.232	72.174	70.748	67.855	64.998
Antigua and Barbuda	68.629	66.578	63.902	58.537	54.804	49.357
Jordan	68.479	67.781	66.877	66.280	64.373	63.632
Spain	67.423	70.151	72.805	74.866	76.130	77.416
Malta	66.264	66.073	65.891	64.755	63.653	62.771
Netherlands	65.521	66.516	66.908	66.732	65.842	64.391
Brazil	64.981	63.999	62.524	60.899	58.974	57.218
Cyprus	63.960	66.416	67.832	67.933	67.961	68.044
Maldives	62.884	70.541	75.626	81.592	86.797	91.990
India	62.432	61.988	60.935	60.514	60.134	59.702
Mauritania	61.964	64.151	65.416	68.245	65.410	62.836
Sierra Leone	61.118	33.178	33.112	34.854	35.633	34.811
Guyana	60.433	59.287	59.717	60.269	59.631	58.827
Albania	59.363	59.242	59.558	60.579	62.014	63.627
Ga The Gambia	57.664	56.926	54.182	51.076	48.064	45.149
Pakistan	57.645	57.279	56.499	55.094	52.836	51.142
Lao People’s Democratic Republic	57.355	54.017	52.163	50.767	49.371	47.967
Fiji	56.801	56.889	56.463	56.057	56.166	56.215
Poland	55.952	56.369	56.460	56.241	55.561	54.688
Norway	55.420	55.420	55.420	55.420	55.420	55.420
Kyrgyzstan	55.202	54.615	56.832	56.408	56.407	54.523
Kenya	55.176	53.420	51.976	51.612	51.146	50.122
Malaysia	55.120	55.923	56.554	56.961	57.226	57.360
Dominica	54.889	54.804	54.114	53.444	52.863	52.447
Morocco	54.152	55.477	56.048	55.787	54.939	53.452
Djibouti	53.679	53.627	52.819	51.845	50.974	50.240
Switzerland	52.435	51.188	49.989	49.067	47.722	46.414
Mauritius	51.889	53.090	51.639	50.377	48.902	47.137
Vietnam	50.338	48.146	47.241	46.360	45.371	44.249
Finland	50.224	50.311	50.952	51.609	52.025	52.321
Trinidad and Tobago	49.966	50.954	51.478	52.892	54.892	57.421
El Salvador	49.907	49.310	48.699	47.510	46.398	45.344
Uruguay	49.344	46.877	45.282	43.620	41.492	40.142
Burundi	49.000	44.156	39.774	36.298	33.507	31.976
Baha The Bahamas	48.614	49.931	51.775	53.379	54.812	55.897
Croatia	47.532	50.048	51.932	53.404	54.487	55.117
Comoros	47.101	42.940	39.195	35.283	31.539	28.299
Democratic Republic of Congo	46.586	50.482	44.285	43.875	36.288	35.966
Belarus	46.298	45.593	50.313	52.285	57.095	55.857
Myanmar	45.165	47.703	49.097	50.242	46.459	47.102
Guinea-Bissau	45.077	43.505	41.403	38.481	36.247	34.159
Tanzania	45.008	48.885	50.289	50.258	49.845	48.915
Slovak Republic	44.941	46.938	47.112	46.869	46.110	45.387
Philippines	44.430	43.595	42.158	40.875	39.671	38.517
Denmark	44.327	45.829	47.004	48.087	48.813	49.185
Serbia	44.073	44.503	43.102	40.791	38.181	35.620
Venezuela	43.900	50.800	54.801	58.501	62.401	66.401
Slovenia	43.638	47.160	49.216	50.798	52.117	53.497
Argentina	43.346	41.469	40.380	39.493	38.022	37.313
Montenegro	43.073	42.203	41.094	39.931	38.562	37.708
Thailand	42.970	43.452	44.463	45.275	46.180	47.093
Mexico	42.897	43.637	43.518	43.430	43.269	43.182
Yemen	42.861	44.435	46.917	48.343	49.628	49.840
Lithuania	42.824	44.626	45.859	46.360	46.477	46.374
Iraq	42.332	42.785	31.754	24.485	24.163	19.532
Tunisia	41.719	48.047	48.536	47.646	45.501	42.979
Armenia	41.475	41.390	39.285	37.418	37.025	36.510
Czech Republic	41.127	43.248	44.563	45.680	46.666	47.628
Malawi	40.477	43.832	44.011	41.447	40.455	39.560
Turkey	40.340	38.085	36.324	35.139	34.186	33.246
Senegal	40.036	41.503	42.533	43.238	43.466	44.023
Bosnia and Herzegovina	39.594	38.370	35.725	32.342	29.777	27.903
Latvia	39.566	40.529	43.436	46.570	41.973	39.643
Ethiopia	39.442	34.071	33.329	32.485	31.461	30.091
Ukraine	39.342	39.387	38.999	39.253	38.418	35.143
Mozambique	39.030	42.719	46.318	49.643	52.095	52.520
Taiwan	38.455	37.887	35.454	33.077	30.842	28.714
Lesotho	38.235	41.867	41.237	42.713	42.864	42.328
Ghana	38.130	37.466	37.575	36.715	36.506	37.231
Tajikistan	36.995	38.630	39.939	40.095	39.729	38.207
Central African Republic	36.959	32.779	28.398	24.857	21.300	18.214
Georgia	36.783	38.022	38.177	36.498	35.506	34.473
Madagascar	36.393	35.973	36.216	36.539	37.178	37.514
Panama	36.152	34.773	33.431	31.217	28.916	26.592
South Africa	36.065	37.598	38.657	38.760	37.820	35.521
Sweden	36.033	32.586	29.158	25.731	22.436	19.251
Colombia	35.918	34.686	33.654	32.840	32.053	31.192
New Zealand	35.313	34.572	34.108	33.294	31.103	29.748
Romania	34.358	34.419	34.033	33.599	32.805	31.673
Bahrain	34.153	39.096	43.746	50.310	58.535	67.161
Nepal	33.922	33.468	32.930	32.457	32.191	32.216
Hong Kong	33.812	32.085	29.161	28.604	28.104	27.548
Costa Rica	32.650	33.331	33.997	34.965	35.948	37.027
Bolivia	32.366	31.420	30.617	29.849	26.680	24.421
Korea	32.020	30.001	27.960	25.954	23.976	22.166
Benin	30.832	30.528	30.111	28.989	27.973	26.691
Mali	30.025	27.176	24.525	24.999	25.668	26.386
Angola	29.909	24.715	19.887	16.323	13.735	12.241
Chad	29.787	29.699	27.827	26.001	24.701	24.856
Cambodia	29.195	28.756	27.627	27.089	26.099	25.036
Burkina Faso	29.147	29.871	30.507	30.999	31.494	32.127
Dominican Republic	28.462	26.655	24.876	23.016	21.222	19.722
Qatar	27.859	27.703	27.397	27.376	27.241	27.096
Togo	27.616	27.255	27.874	27.914	26.461	27.186
Honduras	27.561	27.795	27.918	28.128	28.441	28.915
Syria	27.529	27.902	27.671	27.367	27.098	26.901
China	26.881	22.198	18.447	15.476	12.996	10.932
Mac Republic of Macedonia	26.298	28.187	27.423	27.256	26.931	26.401
Namibia	25.486	29.010	34.676	38.533	41.530	44.450
Indonesia	25.244	23.972	22.685	21.382	20.181	18.968
Zambia	25.124	28.688	29.821	29.885	29.099	28.404
Swaziland	25.109	28.990	30.927	31.882	32.741	33.168
Rwanda	24.427	26.083	24.401	22.129	19.703	18.341
Guatemala	24.220	25.047	25.669	26.078	26.532	27.021
Moldova	23.569	21.650	20.688	20.252	19.050	17.558
Solomon Islands	23.128	20.646	18.722	16.893	15.147	13.601
Uganda	23.044	25.291	29.452	31.903	31.632	31.082
Australia	22.816	23.823	22.964	21.602	20.024	18.164
Congo	22.049	22.192	20.558	19.352	18.113	18.173
Gabon	21.786	20.110	19.491	19.142	18.605	18.003
Peru	21.518	19.191	16.363	13.441	10.787	8.136
Ecuador	20.868	20.818	20.916	21.988	23.463	25.106
Turkmenistan	20.540	26.829	27.479	24.727	16.971	10.877
Suriname	20.042	18.551	18.560	17.129	15.547	13.772
Luxembourg	19.656	21.506	23.758	25.798	28.166	30.656
United Arab Emirates	18.498	18.108	18.117	18.426	18.633	19.163
Bulgaria	17.775	20.464	20.724	20.352	20.501	19.343
Niger	17.690	17.821	18.923	19.778	20.721	21.550
Nigeria	15.715	16.311	17.072	15.701	15.042	13.410
Botswana	15.680	14.080	12.505	10.888	9.425	8.117
Cameroon	14.547	14.682	14.973	14.988	14.993	15.489
Liberia	13.279	14.520	16.814	20.550	22.413	25.258
Kazakhstan	12.901	12.996	13.839	14.184	14.378	14.062
Paraguay	12.751	11.221	10.743	10.348	9.772	9.242
Haiti	12.603	18.969	24.188	29.404	34.240	39.825
Uzbekistan	12.583	14.006	15.516	17.050	18.650	20.209
Russia	11.681	12.089	12.643	14.517	16.800	19.480
Azerbaijan	10.676	9.971	9.980	10.310	11.492	12.959
Algeria	10.655	10.709	10.682	10.683	10.568	10.370
Chile	10.490	10.616	10.625	10.690	10.704	10.928
Iran	9.229	8.021	7.128	6.386	5.760	5.192
Equatorial Guinea	8.520	10.554	8.984	7.109	4.739	2.496
Kuwait	8.057	7.691	7.124	6.664	6.199	5.762
Saudi Arabia	7.091	6.076	5.104	4.314	3.622	3.033
Estonia	5.962	5.618	5.327	5.070	4.823	4.579
Oman	4.018	3.246	2.483	1.817	1.173	5.234
Brunei Darussalam	0.000	0.000	0.000	0.000	0.000	0.000

Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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