Right now, a sovereign debt crisis is engulfing Europe and the threat remains very real for the United States and Japan.
This has been a long time coming, but few could see the roots of this crisis as far back at the 1970’s in the inequalities that grew out of the world’s oil crisis. James Galbraith recently presented on the subject, pointing towards the 80’s credit expansion as a root cause of the economic downturn we are now experiencing.
As credit expanded to compensate for the rise in oil costs, so too did the consumer appetite for debt, and governments followed suit. Now those governments have had to foot the bill for banking sector profligacy, and their financial insecurity is now dramatically impacting global markets.