Dartblog

FROM JOE: The following comes from a friend, a reader, a finance fellow who will post occasionally on The Implosion of the Economy and impecuniosity in general.

10 months ago, the economic crisis was starkly an American quandry with the rest of the world finally immune to Uncle Sam’s consumptionary whims. Virtually all baskets of currencies rose against the “greenback” as Macro players betted that emerging markets and stable Europe could deftly maneuver the asset meltdown/credit freeze in the US.

However, as the European banking system began to crumble and government guarantee packages began to sprout like Cabbage Patch Kids, suddenly the global economy looked more Flynt, Michigan than pre-psycho Patrick Bateman. As per the Overheard on WSJ this morning, the dollar staged a Herculean “I may be ugly but you’re uglier” rally against the sterling and euro. And now credit default swaps, basically insurance contracts that protect bond buyers from underlying defaults, are beginning to agree with currencies.

According to data from Markit printed by WSJ, on August 1, it cost $15,000 to insure $10 million of US Treasuries against default but only $7,000 for German sovereign debt. That number has more than doubled to $32,000 for US debt but Germany’s has spiked to $33,000. The UK trails in at $58,000 and Italy at $109,000.