European debt crisis to “the sanctity of debt contracts,” the era of the past. Debt crisis quickly spread to Ireland from Greece, and has become worse. Moi Nihan columnist Brendan invented a new word “financial origami,” he says of the traditional crafts and origami now overwhelmed by chaos has striking similarities.

In the origami process, a piece of paper can be folded into a completely different after several piece of work, and in the financial world, stocks, bonds or derivatives and other financial assets can also be integrated into a heavy package of new securities in. “Financial origami,” the call will come into being. Brendan Moi Nihan used the word to describe how financial instruments manufactured by the transfer of risk into a risk. In the event of a sovereign debt default, it is difficult by the liquidation of assets, and in accordance with a certain percentage of the face value of debt to repay creditors, the method to solve the problem, so the debt restructuring to be a choice.

In my opinion, some countries are usually short-term interest rates to borrow in foreign currency denominated debt, and then in the maturity of the debt not being able to find a new lender; difficult to obtain the trust of investors, is one of the important reasons behind.

Under the huge debt can not break through the issuance of currency sovereign debt, debt default could, or both. For example, in 2008 against the foreign deposits in Iceland’s deposit insurance liability, and devalue its currency. Russia and Argentina respectively, occurred in 1998 and 2001 debt default and to devalue the currency.

Today, the arrival of European debt crisis debt default event the market is expected to turn again. Ireland, Portugal and Spain Treasury credit default swaps (CDS) CDS prices have reached the sovereignty of Ireland earlier this year level. Although the EU is doing its utmost to avoid debt default, it is the main means of default this year, the European Union and Greece near the International Monetary Fund (IMF) to establish the total amount of 750 billion euros of financial assistance. But I am afraid that these assistance programs are only delayed the final day of the trial only.

European core of the problem is not debt too high, but in their debt principal must be reduced. If you do not, will fall into a vicious circle.

An example of this the American side of the ocean can also be found. California is a very good proof, California was struggling to be completed before Thanksgiving $ 14,000,000,000 debt issuance, but the result is not satisfactory. The recent 100-day plan to balance the budget, California can not enter the bond market, and after Thanksgiving, the United States will face a freeze on issuing bonds until the new governor in January next year, announced its new budget plan.

However, according to the Office of Legislative Analysis of the data, regardless of who served as governor of California had to face a huge budget deficit this year may be up to 250 billion U.S. dollars, and then about 20 billion U.S. dollars annually until 2016. Thus, not only municipal bonds will face difficult times, for the sale of goods and services to the local government enterprises, or even since 2007, losing in the state and local governments work in terms of more than 40 million people, will proximity to danger.

iShares S & P National Municipal Bond exchange-traded fund in the past month has fallen nearly 4%, on a small crowd for this group should become a tool for investment products, this is absolutely terrible performance. The index of municipal bond yields since the November 5 has been an increase of nearly 50 basis points.

Citigroup’s former director Walter Wriston once said, “A country is not bankrupt.” This may be true. But unless this has an unusually large international debt. In other words, this explicit picture of the nature of the liabilities: smooth sailing when he was called the economic engine of high-rise building from the ground; difficult time, immediately became the last straw, so that the building came crashing down.

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