Hi
does anyone think that a collapse in the sovereign bond market of any one country could also spread to the general economy
the query is based on the following logic
-sovereign bonds are considered traditionally the safest investments
-a large part of bank deposits, insurance premia, compulsary savings of people are invested in these bonds
-when the value of these bonds falls - the savings of people in banks and their life savings through fixed deposits, government mandated savings programs also falls
-as a result, if people watch their life savings decline in value, they cut back on current consumption and try to build their savings anew and this time by keeping stuff under the pillow
-the cut back in consumption to build savings causes a general slowdown in the economy spiralling over the long term into lower investment, lesser jobs etc.
-lower investment and lower earnings ultimately means a lower stock market
Am I on the wrong track , is there a fault in my logic??
Please let me know??