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Book Review- Five Thumbs Up for Steve Greenhut's Plunder!
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Italy has a cool 2 Trillion EUR in debt and has much worse debt statistics than Spain. Italy's debt-to-GDP ratio is 118% (2009). Greece got in trouble at 116%. Italy's deficit is smaller and has a high savings ratio. However, nobody focuses on that as Spain is in the limelight with a debt-to-GDP ratio under 60%. Should austerity measures result in a nominal GDP contraction in Italy, its debt stats will worsen very rapidly.
Italy is the elephant in the room not Spain.
We’ve taken many longer term looks at the markets (See, for example, this, this, this or this) but the following chart from UBS Technical Analyst Peter Lee really tickled my fancy
Source:
2011 Technical Market Outlook
Peter Lee – Chief Technical Strategist
Wealth Management Research
December 201
With more and more money pouring into emerging markets, pushing up the value of domestic currencies, more and more countries are trying to slow down the influx through taxes and regulations. The Institute of International Finance, a trade association of global banks, put together a handy scorecard of what’s occurring internationally. The group list a) the measures taken; b) “quantitative indicators” of the pressure on various currencies and c) what’s likely to happen next.
The three indicators are
1) A currency’s current deviation, in percentage terms, from the 15-year average real effective exchange rate.
2) The change in value of a particular currency against the U.S. dollar over the past three months.
3) The current difference, in basis points, in key policy rates with the U.S. Fed funds rate (For instance, Brazil’s Selic rate is currently 10.75% vs. Fed funds at 0.25%, which produces a difference of 1,050bp).
You can’t tell the players without a scorecard: See the pdf that will appear in an upcoming edition of the IIF’s “Capital Markets Monitor.”
