I’m constantly surprised when many investors find themselves caught off guard by volatile events in the market such as the Sovereign Debt Crisis that’s taking grip right now.

Where the in the know investors have been expecting this to occur and some like myself warning it’s been coming for some time.

As an investor nobody can predict the future but with some solid financial education and a grasp of fundamentals you can at least pre-empt the future and thus turn a crisis into an opportunity, or at least not be caught off guard by what’s currently occurring in world markets.

The sovereign debt crisis has been building since the Global Credit Crisis and is the main reason I’ve been suggesting a W dip recession globally has been likely and still is.

The strategy used by most countries has been to borrow money in order to buy time and hopefully buy themselves out of trouble.

The reality is, they have just been racking up the bills and hoping the debt problem will go away.

Take Greece for instance.

Its debt levels are now 127% of its GDP compared to 20% for Australia; Italy, Spain and Portugal are just as bad.

Governments of Greece knew 10 years ago they need to tighten their belts, get rid of their excessive rich pensions and early retirement plans and stop the need to give almost every Greek a government job and actually stop living off borrowed money.

But the Government never wanted to make the hard decisions and now they are left with no choice. They must cut back rapidly or go bankrupt.

Actually they’ll now go bankrupt regardless as their debt simply isn’t repayable and they will default, now or in the future.

Many look at this from a distance with little attachment, especially UK and US citizens, when they should be studying closely the social upheaval in Greece right now as it’s coming to their countries soon if they don’t make immediate changes.

It’s crazy to see some investors fleeing to US Treasury Bonds as a safe haven when they simply aren’t, unless their Governments adopt a change in strategy other then accumulating massive debt to solve a debt problem in the first place.

Of course the U.S. has one giant advantage over the rest of the world.

That is they have a very large printing press and the world uses US dollars thus it stops for now rampant inflation that countries such as Zimbabwe suffer when they run their printing presses hot.

But don’t delude yourself like most US Financial Commentators are, thats what happened in Dubai and now what’s happening in Greece won’t ever happen in the US.

As it’s as certain as the sun will rise that the US and UK and other countries mentioned are heading for the same disaster.

Here’s what else will happen.

US interest rates in due course will sky rocket to try and stop future rampant inflation.

Investors already nervous will cease buying Government Bonds leading to a possible major world solvency issue and yet another potential credit crisis.

The US and UK will face bankruptcy sooner or later.

How much longer they can delay such a fate is unknown or if they can buy themselves out of the debt hole they are in.

One thing is certain, if they don’t start making major changes in the U.S. Fed for example, then the writing is on the wall.

So what does this mean for investors?

If you believe crisis is opportunity then it will provide just that.

If you are financially educated and have a psychology to be able to remain calm when there is panic and act when few others are prepared to then the massive wealth in the world will flow in exponential amounts in your direction and away from the financially uneducated.

If one isn’t financially educated and prepared and not able to pre-empt the future then it will be a stressful time.

What about Australia?

We are fortunate and will fare much better.

Not from good Government leadership I might add, actually in spite of that.

Why will we fare better than other countries? From one thing.

China.

As long as China needs what we have, then we will prosper more than others.

However is it not smart for a country to put aside some reserves from the China boom whilst we can?

Spending everything we have and then taxing the hilt out of the producers in this country to give to the non producers is hardly intelligent.

Australia needs to rapidly build a Sovereign Wealth Fund from the taxes from the commodities boom and not simply spend it.

Once the minerals are mined they are gone forever.

So if our Governments learn to curb their excessive spending and build a reserve fund for long term sustainability of Australia’s economic future then Australia will ride out the Sovereign Debt Crisis better than most and for the long term remain one of the most successful economies of the world.

That’s good news for both our Property and Share Markets and jobs market.

Jamie McIntyre
CEO 21st Century Education