Debt Chairs On The Titanic

The guys over at Hub have a very interesting thought piece over on their site about the possible escalating problem being driven by the ever-increasing debt. Hub says:

The slowly escalating “problem” in the subprime mortgage market based out of the United States seems to be slowly infecting wider and wider circles, creating a climate of fear not seen since 1997 – the year the Asian Financial Crisis dealt a massive blow to Asia’s developing economies. Except this time the tables are turned, and it seems to be America and Europe in for the sucker punch. Here are the contributing factors to a rapidly interlinking problem, which may or may not be creating a perfect storm, however brief:

1. US subprime mortgages meltdown, which has hurt the US housing market and overall lending.
2. Near collapse of the IKB – Germany’s industrial credit bank, which resulted in a €8.1 billion bailout and some raised eyebrows in Germany.
3. Hedge funds, highly leveraged on debt, going belly up because they can’t refinance debt. Australia, the US, Germany, France, and the UK all look to be affected.
4. Private equity firms who handled record buyouts are sitting on up to 40% debt for their acquisitions, which need to be serviced.
5. End of the yen carry trade – silent but deadly.
6. Rising adjustable rate mortgages in the US.
7. Big banks are seeing merger and acquisition activity frozen, resulting in a full stoppage of deals that were in progress, which can’t be good for bonuses.

More detail over at Hub.