Morning all, and welcome to your first ever networks round-up.
Hot networks news this week includes this rather attractive networks visualisation from the New York Times, which breaks down various elements of the ‘Euro crisis’.*
A first slide shows how everything is connected: in this case the way that debt straddles country borders.
The graphs the goes on to show the debts that borrowers from one country have with banks in other countries. It then charts the possible ways a crisis could spread.
The immediate risk is, of course, posed by Greece. Greece has massive debts in 9 other economies, including the ‘shaky’ Portugal, Italy, Ireland and Spain.
This could possible lead to a scenario of ‘debt contagion’ where, given the single currency, we might have a run on the banks scenario as people shift their money from more risky to less risky countries.
A collapse in Greece would then lead to less confidence in the four shakier counties, possibly leading to an increased debt burden if interest rates are raised. If a country such as Italy were not able to cope, this could massively impact France whose banks own $366 billion of Italian debt.
Crises impacting in France and Italy could then massively impact the USA, which has a very large exposure in both these countries. When it’s all connected, crises can go global.
Wondering how the banks and global corporations all link up beyond country borders? If you haven’t read up on ‘the network of corporate countrol’, you really should now.
The research,based on 2007 data , shows an unstable global structure. The the network is scale-free, meaning that a few companies have the vast of majority of all connections, suggesting that if one company goes down, it will have (as 2008 showed) massive repercussions on rest of the system.
*What follows is a description of other people’s research. Here I am just the networks messenger.