tag:blogger.com,1999:blog-8732662769765511163.post5038257590870432510..comments2023-07-31T11:06:29.485+02:00Comments on Transition: After the Global CrisisD. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-8732662769765511163.post-63241243573465472282011-12-01T08:55:54.580+01:002011-12-01T08:55:54.580+01:00"Work hard and produce more than we consume f..."Work hard and produce more than we consume for a while perhaps?" <br /><br />For a while, yes, it would be likely to help. But as a general rule - following the advice put by Shakespeare on Polonius lips: Neither a borrower nor a lender be... - can be a poor receipe for prosperity. A more flexible rule, possibly averaging a zero deficit over the years but leaving room for anti-cyclical government policy is definitely superior. <br /><br />The important thing is to avoid the danger area, of growing debt/GDP ratios up to unsustainable levels, where (approsimately)the interest rate on debt exceeds GDP growth rate.D. Mario Nutihttps://www.blogger.com/profile/17319653816487296802noreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-88585022291933008872011-11-29T04:25:52.647+01:002011-11-29T04:25:52.647+01:00"It need not be so." True indeed. Do w..."It need not be so." True indeed. Do we not have examples of countries that have been in similar situations? What have others done to get out of their problems?<br /><br />Work hard and produce more than we consume for a while perhaps? <br /><br />Good leaders of monetary policy would keep countries producing a little more than they consume all along. A country, business, or person should always operate from a position of power, not debt. Growth may be slower, but it comes with more stability.Anonymoushttps://www.blogger.com/profile/05098127331684338857noreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-14179424831253125372011-10-08T12:09:15.767+02:002011-10-08T12:09:15.767+02:00Italy at present is nowhere near insolvency, Moira...Italy at present is nowhere near insolvency, Moira, given the stability of its debt/GSP ratio (though high), the only primary surplus in Europe after Germany's, the relatively low private debt of households and enterprises, the long term nature of its government debt (average maturity 7 years) and an average interest rate of 4%.<br /><br />Italy's fundamentals are better than Spain's, but Zapatero has stepped down and called new elections, while Berlusconi - who has lost not only regional elections but four referendums and has reconstituted his parliamentary majority through corruption and criminal complicities, is not only maintaining his bad government but is actually threatening to stand for re-election in 2013. This is why Italy's spread rose by about 70 points and overtook Spain's, as recognised by the Treasury Minister Giulio Tremonti.<br /><br />As the average interest rate on government debt will rise with debt renewals and new debt, Italy will undoubtedly become insolvent before its new 10-year bonds reach maturity.<br /><br />Hence the rating agencies were right in downgrading not only Italy's government bonds, but also major companies such as Eni, Enel and Finmeccanica, banks like Unicredit and Intesa, and no less than 30 local authorities starved of funds by the recent fiscal package. <br /><br />Jim, I am not optimistic about the implementation of the proposals I list, hence my prospect of a more unpleasant world than it was before the crisis. I only said that "It need not be so".Mario Nutinoreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-23439098570137682112011-10-05T16:01:32.996+02:002011-10-05T16:01:32.996+02:00You have a long "shopping list", Mario! ...You have a long "shopping list", Mario! There have been such strong negative reactions to a lot of the things you favour (retail/investment banking split, derivatives regulation, short selling restrictions) that I fear the eventual extent of regulatory change will be much smaller than we really need.Jimhttps://www.blogger.com/profile/07110218804343804328noreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-23665904933508772342011-10-05T14:31:39.110+02:002011-10-05T14:31:39.110+02:00Do you think Moody's downgrading of Italy'...Do you think Moody's downgrading of Italy's government bonds by three notches, from aa2 to a2, is justified by Italy's fundamentals?Moiranoreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-31131064501831450492011-10-05T13:04:12.684+02:002011-10-05T13:04:12.684+02:00A very good point, Bob, thanks.
The first thing t...A very good point, Bob, thanks.<br /><br />The first thing that Christine Lagarde did, taking office at the helm of the IMF in September, was to issue a stern warning on the urgency to re=capitalise European banks, to the tune of at least €200bn. She was greated by European officials' outraged denials.<br /><br />The serious crisis of the Franco-Belgian bank Dexia - that is threatening to lose France the AAA credit rating and raised the spreads of both countries - yesterday persuaded Ecofin that perhaps there was a problem and something needed to be done. But "co-ordinated but separate" national rather than European interventions are unlikely to work (see today's FT and Eurointelligence.com).Mario Nutinoreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-2135828715724136672011-10-05T04:22:11.618+02:002011-10-05T04:22:11.618+02:00"...ultimately, a widespread crisis of sovere..."...ultimately, a widespread crisis of sovereign debt, particularly in the Euro-zone". <br /><br />At the moment, in turn, this is feeding back into a new round of banking crisis, with the reduction in the value of government bonds in banks' portfolio.Bobnoreply@blogger.com