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The End of the Pound?

Back in October, when Iceland went bankrupt, I did an analysis of the overseas debt of major countries. I was surprised to see that the U.S. was in relatively good shape. But the big problem? Here’s what I wrote back then.

The biggest dangers are for the UK and Switzerland. These countries, although much bigger than Iceland, are major financial intermediaries with big external debts. What’s more, they are outside the major currency blocs, with debt denominated in foreign currencies. That means if their currency starts to devalue, their debts will become more and more onerous.

That’s what we are seeing with the UK.

I think that countries outside the major currency blocs are going to be forced to join, for self-preservation.

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