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The Final Word by Jim Thompson
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According to the Financial Times, 14 December 2011, page 13, there is now a new financial threat looming in the Eurozone. It turns out there is a financial instrument called collateralized loan obligations (CLOs). These are instruments used to buy loans made to private equity firms to finance acquisitions.
By 2014, 98% of the CLOs will have gone "static," according to the article. According to banking regulations, "...CLOs have a finite life span after which they are not allowed to trade new loans for existing ones..." Hence the term "static." In the next 12-18 months, there are billions of euro-denominated CLOs coming due, and apparently no one has figured out how to keep the majority of them from default.

The disintegration of the euro continues.


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