Roubini jumps on my bandwagon.

Machiavelli wrote:Roubini jumps on my bandwagon.

I thought you were Roubini?

Mach, you never came back to me about that wager. You prepared to put your money where your mouth is?

I responded, Dan. I simply do not have the heart to plunder--even for a nominal amount--someone like yourself who, living in Europe, will suffer so much hardship from the collapse of its economies. Keep your money, Dan. Spend it instead on some means of defending yourself and your loved ones from the looting mobs. You're going to need it.

Oh dear, Mach. I think you've been watching too much hysterical news reporting.

Perhaps. Here's one.

The UK is at less risk than the US of defaulting, Mach. Seriously. We are not Argentina.

Besides, how will a book defend me against looters?

Oh really, Dan? What sort of exposure do HSBC, RBC and Barclays have to continental debt default (best estimates I've seen are in the range of $1.5-3 trillion--more than enough to break your banks) and how will your government react to the collapse of its banking system? As Ireland and Iceland have demonstrated, there is more than one way to bust a treasury.

From observing the events of the past few days, I suspect that you're right about the UK--you lack Argentina's social cohesion, so that when the s**t really hits the fan you'll have even more chaos than they did.

HSBC is not really a UK bank (the clue is in the name), and Barclays is largely American. Sure, we are exposed if you go down the Swannee, but we would be anyway. Still, we are in a better position due to lower debt.

As for the riots, they are not a patch on what we had in the 1980s ones, or on trouble elsewhere. That's the problem with imported US gang culture, I guess. It looks to be calming down in London and the copycats will rumble on a bit but should calm down. We probably won't neet to send Marines in (LA 92). Like I say, too much TV.

Hmmm. I could have sworn that the bulk of HSBC's assets (notwithstanding the name) had been picked up in the acquisition of the old Midland Bank (one of the banks you Brits used to charmingly refer to as the "Big Four"). The business card in my rolodeck says Canary Wharf--I'm pretty sure that's in London (if it didn't burn down last night)--and the league tables show it as having the third largest retail and commercial banking operations in the UK (behind only RBS and "largely American" Barclays, and nearly double the size of 4th place Lloyd's).

There was little trouble in London last night. Seriously, you should stop relying on sensationalist media.

As for UK banking...

HSBC was the UK's largest back before the 2008 crash (when Lloyds TSB merged with HBOS), but it is also the largest bank in Hong Kong and is expanding rapidly in China. Less than half of its assets are in Europe, which includes a significant Private Banking subsidiary in Switzerland as well as operations in other parts of Europe.

Barclays Group is also more of a global group based in the UK than a UK bank - most of its branches are abroad, it has had a significant cash from Qatar, and does a lot of business in the USA (hence it was a recipient of large chunks of the AIG bailout money).

Where a company is based (or even listed as a shareholding - although HSBC is listed in London andHK, and Barclays in London and NY) is not always an indicator of where most of the business is.

Not sure how it's relevant to the Euro, as the UK is outside the Euro and so has full control over monetary policy (so if necessary can inflate itself out of trouble), has a lower debt to GDP ratio than the US and the European nations in trouble, and is currently being seen as a relative 'safe haven' on the bond markets.

Now, just admit you are too yellow to take a bet, and we'll move on, shall we?

Call it what you will; I never bet against my interests and, in this case, it would be very much in my interests to be wrong. I sincerely hope the current sovereign debt crisis turns out to be nothing but a passing inconvenience, though I seriously doubt that it will.

The UK's peril from the structural problems in the Euro stem from its financial system's exposure to general European insolvency and default; despite its relatively low current debt burden, the UK is running one of the highest deficits in Europe and, accordingly, will be in a poor position to rescue its banking system in a collapse--placing it at risk of finding itself in a position not unlike the ones recently faced by Ireland or Iceland (note that Iceland also controlled its currency, but its banks were subject to massive obligations denominated in currencies it did not control). To offer an illustrative metaphor, the crater made by the Euro will throw up enough debris to bury the economies--like the UK's--along its rim.

It is now practically a foregone conclusion that at least Greece will default ($450 billion), with Portugal, Spain and even Italy looking very shaky. In the face of such defaults, many, if not most, continental European banks and many businesses will be rendered insolvent. That insolvency threat is already making Eurozone banks reluctant to lend--either to commercial borrowers or to each other--a situation very much like the "lockup" of the US credit markets that occurred after Lehman failed, only on a significantly larger and broader scale. The result will be a rippling wave of insolvencies across the continental economies, and the British Banks (even those with diversified assets in Asia) will not escape that wave.

The collapse of the US credit markets in 07-08 had enough impact on RBS and Lloyds that neither would have survived had not the Brtish government injected significant capital. Given your government's own financial difficulties (which, it would appear, have already been the underlying cause of significant civil unrest) it seems unlikely that it will have the resources or the political will to undertake a far more massive bailout. Add that to the drag created by a full-scale depression among your European trading partners and you end up with some very rough sledding, indeed (though perhaps less rough than in Spain or Greece).

I've sold the story to Le Monde.

Bond traders not sanguine about the Eurozone's future.