Al Jazeera: The Omnipresent Specter of Sovereign Debt – Defining the Nature of the Post-Recovery Period and Beyond

Mirtchev, A. (2009, May 24). The Omnipresent Specter of Sovereign Debt – Defining the Nature of the Post-Recovery Period and Beyond. AlJazeera.

Al Jazeera06 Alexander Mirtchev Riz Khan Show Global CrisisDr. Alexander Mirtchev, President of Washington, D.C.-based Krull Corp., assesses the short- and long-term implications of policies, in particular in the U.S., undertaken to counter the recession, exemplified by the intensive government intervention in the private sector and financial markets. This intervention has brought to the surface a range of issues likely to impact the restoration of the “social contract” between Main Street, Wall Street and the government. He considers that, as the U.S. government has only a limited set of tools at its disposal to deal with the current crisis in all its complexities, the duration of recovery will be closely correlated with the levels of sovereign debt and the impending concerns over burgeoning deficits. The presence of the “elephant in the room” – the specter of stagflation – economic depression and incipient inflation – is also a factor that can exacerbate the wider economic impact of worsening sovereign debt. Mirtchev stresses that in the context of sovereign and corporate balance sheet fragility, the use of government intervention in the markets as a “cure-all” and a “substitute” for bankruptcy and other corrective market mechanisms, could have unintended consequences.  It is also imperative that government intervention be balanced and accompanied by a clear exit strategy. How the U.S. and other developed economies approach and coordinate their exit strategies could also have a fundamental impact on the restoration of market confidence and global economic security.