The document discusses the sovereign debt crisis in Greece and its potential impact on the European Monetary Union (EMU). It notes that Greece is facing severe budget deficits and debt levels that threaten its long-term fiscal stability. There is a risk that the crisis could spread to other weaker Eurozone economies like Portugal, Spain, and Italy. Immediate intervention is needed to prevent Greece's problems from worsening and sparking a wider crisis across Europe. However, options are limited given rules prohibiting bailouts between Eurozone members. In the longer run, the crisis has revealed structural weaknesses in the EMU and calls its sustainability into question.
The Cyprus crisis is one of the most complex in the Eurozone -although in absolute terms it is a minor crisis. An analysis of the ongoing developments from different perspectives leads to the conclusion that we are witnessing a «perfect crisis» at the confluence of sovereign debt and banking crisis together with debt overhang of business and households and a severe decline of competitiveness. As a result CY has amassed a large external debt that can not be repaid, no matter what fraction of the country’s real domestic economic output is appropriated through austerity measures. Hence, fiscal austerity leads to deflationary stagnation and alone does not work. We advocate a policy response that addresses multiple dimensions of the problem with policy options of (1) austerity deleveraging, (2) structural reforms, (3) financial innovations, (4) partial privatizations and (5) debt restructuring. These options are drawn from lessons of what worked well, and what not, in crises of other countries and these lessons are summarized in lieu of conclusions
The document discusses several topics:
1) Taiwan and China signed a trade agreement representing a form of detente between the two entities embroiled in a sovereignty dispute for over 60 years.
2) The agreement opens markets in key sectors like banking, insurance, and movies, reflecting thoughts that the "new normal" is a world of changing risks and opportunities during this global economic transition period.
3) Protecting one's wealth in this epochal transition requires proactive risk assessment and management as debt levels globally are over 4 times annual global GDP and resolving this debt will be deflationary for years to come.
The document provides an economic update and outlook for December 2011. It discusses the ongoing debt crisis in the Eurozone and whether the Euro will survive. It notes the ideological differences between Germany and other countries in their approaches to dealing with the crisis. Domestically, it comments on the reversal in stance by the Indian opposition on retail FDI and the potential impact on economic momentum. Inflation is expected to fall by the end of the fiscal year. The outlook is cautiously positive on long-term debt as interest rates may fall over the next 2-3 years.
Fasanara Capital | Weekly Investment Outlook | December 17th 2011Fasanara Capital ltd
The document provides an investment outlook and analysis of the European sovereign debt crisis and financial markets. It discusses the failure of recent ECB actions to restore confidence, predicts a confidence collapse scenario. It examines debt flows and stock levels facing European countries in 2012, risks to bank deposits and consumer spending. It argues that Germany will be left alone to handle the crisis but faces opposition from struggling countries and its own economic problems, making large-scale solutions difficult to achieve.
Western governments are hopelessly addicted to deficit financing while refusing to address looming funding issues - with apologies to the embarrassingly foolish Angela Merkel, politicians can no more successfully “battle” the markets than you and I can successfully “battle” gravity. Petrocapita is an investment trust built around the premise that demand for energy will continue to move prices higher over the long-term. Petrocapita was created to allow investors to add professionally managed oil & gas assets directly to their portfolios.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
The document discusses applying concepts of situational awareness (SA) to investing in alternative investments such as hedge funds. SA involves perceiving elements in one's environment, comprehending their meaning, and projecting their future status. The document outlines applying SA's three levels - acquiring data, evaluating the data to create an understanding, and projecting future states - to gain knowledge about macroeconomic conditions, the alternative investment industry, and individual managers. This framework can help differentiate investment choices and ensure accurate mental models are used for decision making.
Ireland, PIGS, QE2, the euro and the melting potMarkets Beyond
The document discusses the ongoing eurozone debt crisis, quantitative easing policies, and asset bubbles. It argues that central banks' use of quantitative easing has led to repeated boom and bust cycles by inflating asset bubbles that eventually pop. The Fed is stimulating markets but not the real economy. Government fiscal policy should directly create jobs, not rely on indirect "wealth effects" from rising stock prices. Preventing asset bubbles from forming is preferable to dealing with the aftermath of their bursting.
The Cyprus crisis is one of the most complex in the Eurozone -although in absolute terms it is a minor crisis. An analysis of the ongoing developments from different perspectives leads to the conclusion that we are witnessing a «perfect crisis» at the confluence of sovereign debt and banking crisis together with debt overhang of business and households and a severe decline of competitiveness. As a result CY has amassed a large external debt that can not be repaid, no matter what fraction of the country’s real domestic economic output is appropriated through austerity measures. Hence, fiscal austerity leads to deflationary stagnation and alone does not work. We advocate a policy response that addresses multiple dimensions of the problem with policy options of (1) austerity deleveraging, (2) structural reforms, (3) financial innovations, (4) partial privatizations and (5) debt restructuring. These options are drawn from lessons of what worked well, and what not, in crises of other countries and these lessons are summarized in lieu of conclusions
The document discusses several topics:
1) Taiwan and China signed a trade agreement representing a form of detente between the two entities embroiled in a sovereignty dispute for over 60 years.
2) The agreement opens markets in key sectors like banking, insurance, and movies, reflecting thoughts that the "new normal" is a world of changing risks and opportunities during this global economic transition period.
3) Protecting one's wealth in this epochal transition requires proactive risk assessment and management as debt levels globally are over 4 times annual global GDP and resolving this debt will be deflationary for years to come.
The document provides an economic update and outlook for December 2011. It discusses the ongoing debt crisis in the Eurozone and whether the Euro will survive. It notes the ideological differences between Germany and other countries in their approaches to dealing with the crisis. Domestically, it comments on the reversal in stance by the Indian opposition on retail FDI and the potential impact on economic momentum. Inflation is expected to fall by the end of the fiscal year. The outlook is cautiously positive on long-term debt as interest rates may fall over the next 2-3 years.
Fasanara Capital | Weekly Investment Outlook | December 17th 2011Fasanara Capital ltd
The document provides an investment outlook and analysis of the European sovereign debt crisis and financial markets. It discusses the failure of recent ECB actions to restore confidence, predicts a confidence collapse scenario. It examines debt flows and stock levels facing European countries in 2012, risks to bank deposits and consumer spending. It argues that Germany will be left alone to handle the crisis but faces opposition from struggling countries and its own economic problems, making large-scale solutions difficult to achieve.
Western governments are hopelessly addicted to deficit financing while refusing to address looming funding issues - with apologies to the embarrassingly foolish Angela Merkel, politicians can no more successfully “battle” the markets than you and I can successfully “battle” gravity. Petrocapita is an investment trust built around the premise that demand for energy will continue to move prices higher over the long-term. Petrocapita was created to allow investors to add professionally managed oil & gas assets directly to their portfolios.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
The document discusses applying concepts of situational awareness (SA) to investing in alternative investments such as hedge funds. SA involves perceiving elements in one's environment, comprehending their meaning, and projecting their future status. The document outlines applying SA's three levels - acquiring data, evaluating the data to create an understanding, and projecting future states - to gain knowledge about macroeconomic conditions, the alternative investment industry, and individual managers. This framework can help differentiate investment choices and ensure accurate mental models are used for decision making.
Ireland, PIGS, QE2, the euro and the melting potMarkets Beyond
The document discusses the ongoing eurozone debt crisis, quantitative easing policies, and asset bubbles. It argues that central banks' use of quantitative easing has led to repeated boom and bust cycles by inflating asset bubbles that eventually pop. The Fed is stimulating markets but not the real economy. Government fiscal policy should directly create jobs, not rely on indirect "wealth effects" from rising stock prices. Preventing asset bubbles from forming is preferable to dealing with the aftermath of their bursting.
The document summarizes Martin Wolf's lecture on the failures of global finance and capital flows that have led to emerging market crises. Some key points:
1. Financial liberalization in emerging markets led to excessive risk-taking and poor regulation, fueling credit growth and asset bubbles.
2. Macroeconomic imbalances like fiscal deficits and currency pegs exacerbated risks. Currency crises then triggered financial crises as foreign debt overwhelmed many countries and companies.
3. Major crises included the Latin American debt crisis in the 1980s, the Mexican "Tequila" crisis of 1994-95, the Asian Financial crisis of 1997-98, and the Argentine crisis of 2001-02. The Asian crisis
The document discusses the efforts of the ECB and Fed to address inflation and deflation in the Eurozone. It notes that while the ECB has signaled a willingness to purchase Spanish and Italian bonds, there is uncertainty around whether this will actually occur due to German opposition. High debt levels across many Eurozone countries, including government, corporate, and household debt exceeding 180% of GDP in most cases, have increased the risk of deflation. Local measures may be needed to restructure public and private debt, as increased centralization and austerity alone will not solve the crisis.
1) The document analyzes historical data from 14 advanced economies over 140 years to identify trends leading up to financial crises. It finds that periods of high credit growth and leverage often precede crises and result in long, slow recoveries, especially when combined with high public debt.
2) Five facts are presented: advanced economies have experienced more frequent crises since the 1970s as financial sectors grew rapidly independent of the real economy; crises are deflationary and depress economic growth; unprecedented leverage in the banking sector now compared to the past; emerging markets insure against currency crises while developed markets benefit; and demographic changes may undermine long-term liquidity.
3) Five lessons recommend macroprud
1. The document discusses the failures of development policies like the Washington Consensus and financial globalization due to their reliance on first-best thinking when second-best thinking is required given real-world market and institutional failures.
2. It argues policy should be based on second-best thinking and target "binding constraints" through selective, sequential, and context-specific reforms rather than assuming all distortions can be removed at once.
3. Financial globalization failed because capital markets operate under significant market imperfections that cannot be fully addressed, and capital inflows can cause overvaluation and move exchange rates in ways that hinder development.
Covid19 Pandemic: Looming Global Recession and Impact on BangladeshMd. Tanzirul Amin
The document summarizes the economic impacts of the Covid-19 pandemic, including a potential global recession. It discusses indicators that a recession may occur, such as stock market declines and yield curve inversions. The pandemic has reduced global production and exports while increasing unemployment. For Bangladesh specifically, exports and remittances declined sharply, threatening employment and government revenue. The economic challenges for Bangladesh recovering are substantial in the face of an uncertain global economic outlook.
The document provides an analysis of the constraints of the Bretton Woods system and lessons that can be learned from it. It discusses how the system was set up for failure because it paid little attention to governance issues and failed to instill collective action among members. While the Bretton Woods system delivered low inflation and growth during its existence, it ultimately collapsed due to internal imbalances and a lack of accountability. The document examines what aspects of Bretton Woods still resonate today and implications for designing future international financial systems.
1) The document discusses the clash between short-term and long-term solutions to the euro area crisis. While urgent action is needed to reduce borrowing costs in Italy and Spain, without long-term reforms like fiscal and banking unions, Germany's willingness to provide funds may decline and the risk of a euro breakup will rise.
2) The euro area crisis stems from economic divergence pre-euro and an institutional deficit without a common fiscal policy. Crisis countries benefited from low rates but did not reform, while northern Europe performed better. The ECB cannot directly intervene due to treaty limits.
3) Deeper integration like banking stress tests and allowing the ECB to directly buy sovereign debt are urgently needed to
The document discusses the failures of governments and central banks to allow market forces to set interest rates. It argues that continual credit expansion through low interest rates set by governments will inevitably lead to a major financial crisis. The author believes past currency collapses show that attempting to stimulate unlimited consumption through monetary policy is misguided and only delays an inevitable crisis. Allowing market-set interest rates could help avoid increasingly severe boom-bust cycles and prevent more taxpayer bailouts being needed to resolve future crises.
The EMU debt crisis occurred due to lenient criteria for countries joining the eurozone and a lack of fiscal policy coordination once in the union. When the global financial crisis hit, weaknesses in some eurozone countries' fiscal positions were exposed. As governments bailed out failing banks, investors began demanding higher risk premiums from weaker countries like Greece, exacerbating their debt problems. While stricter admission standards and sanctions for breaking fiscal rules may have prevented this, it is now nearly impossible for a country to exit the eurozone without causing further economic and political crises. Reforms are needed to stabilize the currency union.
This presentation considers the possibility of a second recession in the face of the ongoing European Debt Crisis, misguided attempts to address the crisis through austerity and struggling world economies. It also reflects on the impact of the probable break-up of EU’s currency union, measures to avert the scenario and vulnerable positions of the economies of the USA, China and India to more trouble in the Euro-zone.
The doomsday scenario has been summarized by Martin Wolf of Financial Times (May 17, 2012):
“The mechanisms at work would be powerful: bank runs; the imposition of (illegal) exchange controls; legal uncertainties; asset price collapses; unpredictable shifts in balance sheets; freezing of the financial system; disruption of central banking; collapse in spending and trade; and enormous shifts in the exchange rates of new currencies.
.
Political leadership is crucial to solving the euro area crisis but is currently lacking. Strong leadership is needed to implement difficult reforms and integrate institutions to stabilize economies and manage banking and debt crises. However, modern leadership requires cooperation and input from citizens, which can make leaders appear weaker. The dysfunctional relationship between Germany and France also hinders crisis management. Overall, leadership is challenged by greater integration demands and preference for bilateral over multilateral cooperation.
Financial market stability Final SubmissionPieter Roux
This document provides a summary of the anatomy and dynamics of the global financial crisis that began in 2007-2008. It describes how a crisis in the US subprime mortgage market multiplied into a crisis of staggering global proportions, with initial subprime losses of $250 billion resulting in estimated global GDP losses of $4,700 billion and a decrease in global stock market capitalization of $26,400 billion. The document then analyzes the dynamics of the crisis, tracing how unsustainable trade imbalances and the bursting of the US housing bubble contaminated the global financial system through complex financial instruments. It divides the crisis into two phases: the initial subprime mortgage crisis and run on the shadow banking system, followed by the collapse of Lehman Brothers
The document provides an economic update and outlook for June 2011, noting renewed concerns over sovereign debt in Europe, particularly for Greece, and the potential implications of a default by a Eurozone country. It recommends investors either look at relatively safer international markets like the US and China through ETFs or more globally oriented sectors, and also discusses using covered call strategies during periods of range-bound markets. The debt markets outlook expects rates to remain subdued due to expected impact of higher diesel prices on inflation.
The document discusses policy responses to the Greek debt crisis. It examines the limited options available, which include austerity, default, monetary expansion, and an external bailout. The best response would involve elements of all four - austerity measures and tax enforcement, a targeted expansion of the money supply, private sector cooperation to minimize economic damage, and using existing EU financial mechanisms like the EFSF to distribute costs. A bailout should reestablish credibility while causing minimal contraction for Greece's recovery. Avoiding excessive austerity and default would limit negative economic impacts, while resolving the crisis would boost confidence and reduce risk across the European periphery.
by
Eduardo Levy-Yeyati*
Ugo Panizza**
Inter-American Development Bank
Banco Interamericano de Desarrollo (BID)
Research Department
Departamento de Investigación
Working Paper #581
The Causes of the Global Economic-cum-Financial Crisis_International Relation...Cearet Sood
This document is a cover sheet for a student submission on the causes of the global economic-financial crisis. It provides the student's name, course details, assignment title, word count, and a plagiarism declaration. The main body of the assignment analyzes various contributing factors to the crisis, including the subprime mortgage crisis in the US, the role of mortgage-backed securities and collateralized debt obligations, the failures of Lehman Brothers and other banks, the impacts on markets and economies globally, and regulatory failures. Key events discussed include the housing market collapse, stock market crash, recession in countries like Ireland and Greece, and policy responses by governments and central banks.
The Demographic Dimension of Portugals CrisisEdward Hugh
Portugal faces a looming social and demographic crisis due to an aging population and stagnating economy over the past decade. The author argues that Portugal's most recent economic crisis was not an isolated event, but rather part of an underlying process of population aging slowing growth. As populations age, the proportion of prime working-age individuals decreases, which can reduce economic growth and strain public finances through rising pension and healthcare costs. Portugal has experienced very low fertility rates, rapid population aging, and a reversal from net emigration to net immigration, presenting challenges for its struggling economy.
Harvard Kennedy School: Eurozone Study Jan. 2017 chaganomics
This document summarizes a paper that examines the resilience of the Eurozone in the face of crises. Deep financial integration created interdependence among Eurozone members, providing mechanisms to reallocate resources and absorb economic shocks. Global market pressures forced political leaders to reinforce the monetary union through fiscal and monetary backstops. Ongoing progress on banking supervision and regulation has further strengthened the currency union. While the Eurozone still falls short as an optimal currency area, financial integration may drive further integration through banking reforms, even amid populist opposition to other reforms.
This document introduces Julia, a girl from Castelló and Fortià, Spain who has two houses and enjoys dancing, listening to music, playing volleyball, singing in the shower, going shopping for hours, and eating cakes and sweets while disliking eggs. Her friend Kate Moss describes Julia as a nice, fast-talking girl who loves various hobbies and activities.
The document summarizes Martin Wolf's lecture on the failures of global finance and capital flows that have led to emerging market crises. Some key points:
1. Financial liberalization in emerging markets led to excessive risk-taking and poor regulation, fueling credit growth and asset bubbles.
2. Macroeconomic imbalances like fiscal deficits and currency pegs exacerbated risks. Currency crises then triggered financial crises as foreign debt overwhelmed many countries and companies.
3. Major crises included the Latin American debt crisis in the 1980s, the Mexican "Tequila" crisis of 1994-95, the Asian Financial crisis of 1997-98, and the Argentine crisis of 2001-02. The Asian crisis
The document discusses the efforts of the ECB and Fed to address inflation and deflation in the Eurozone. It notes that while the ECB has signaled a willingness to purchase Spanish and Italian bonds, there is uncertainty around whether this will actually occur due to German opposition. High debt levels across many Eurozone countries, including government, corporate, and household debt exceeding 180% of GDP in most cases, have increased the risk of deflation. Local measures may be needed to restructure public and private debt, as increased centralization and austerity alone will not solve the crisis.
1) The document analyzes historical data from 14 advanced economies over 140 years to identify trends leading up to financial crises. It finds that periods of high credit growth and leverage often precede crises and result in long, slow recoveries, especially when combined with high public debt.
2) Five facts are presented: advanced economies have experienced more frequent crises since the 1970s as financial sectors grew rapidly independent of the real economy; crises are deflationary and depress economic growth; unprecedented leverage in the banking sector now compared to the past; emerging markets insure against currency crises while developed markets benefit; and demographic changes may undermine long-term liquidity.
3) Five lessons recommend macroprud
1. The document discusses the failures of development policies like the Washington Consensus and financial globalization due to their reliance on first-best thinking when second-best thinking is required given real-world market and institutional failures.
2. It argues policy should be based on second-best thinking and target "binding constraints" through selective, sequential, and context-specific reforms rather than assuming all distortions can be removed at once.
3. Financial globalization failed because capital markets operate under significant market imperfections that cannot be fully addressed, and capital inflows can cause overvaluation and move exchange rates in ways that hinder development.
Covid19 Pandemic: Looming Global Recession and Impact on BangladeshMd. Tanzirul Amin
The document summarizes the economic impacts of the Covid-19 pandemic, including a potential global recession. It discusses indicators that a recession may occur, such as stock market declines and yield curve inversions. The pandemic has reduced global production and exports while increasing unemployment. For Bangladesh specifically, exports and remittances declined sharply, threatening employment and government revenue. The economic challenges for Bangladesh recovering are substantial in the face of an uncertain global economic outlook.
The document provides an analysis of the constraints of the Bretton Woods system and lessons that can be learned from it. It discusses how the system was set up for failure because it paid little attention to governance issues and failed to instill collective action among members. While the Bretton Woods system delivered low inflation and growth during its existence, it ultimately collapsed due to internal imbalances and a lack of accountability. The document examines what aspects of Bretton Woods still resonate today and implications for designing future international financial systems.
1) The document discusses the clash between short-term and long-term solutions to the euro area crisis. While urgent action is needed to reduce borrowing costs in Italy and Spain, without long-term reforms like fiscal and banking unions, Germany's willingness to provide funds may decline and the risk of a euro breakup will rise.
2) The euro area crisis stems from economic divergence pre-euro and an institutional deficit without a common fiscal policy. Crisis countries benefited from low rates but did not reform, while northern Europe performed better. The ECB cannot directly intervene due to treaty limits.
3) Deeper integration like banking stress tests and allowing the ECB to directly buy sovereign debt are urgently needed to
The document discusses the failures of governments and central banks to allow market forces to set interest rates. It argues that continual credit expansion through low interest rates set by governments will inevitably lead to a major financial crisis. The author believes past currency collapses show that attempting to stimulate unlimited consumption through monetary policy is misguided and only delays an inevitable crisis. Allowing market-set interest rates could help avoid increasingly severe boom-bust cycles and prevent more taxpayer bailouts being needed to resolve future crises.
The EMU debt crisis occurred due to lenient criteria for countries joining the eurozone and a lack of fiscal policy coordination once in the union. When the global financial crisis hit, weaknesses in some eurozone countries' fiscal positions were exposed. As governments bailed out failing banks, investors began demanding higher risk premiums from weaker countries like Greece, exacerbating their debt problems. While stricter admission standards and sanctions for breaking fiscal rules may have prevented this, it is now nearly impossible for a country to exit the eurozone without causing further economic and political crises. Reforms are needed to stabilize the currency union.
This presentation considers the possibility of a second recession in the face of the ongoing European Debt Crisis, misguided attempts to address the crisis through austerity and struggling world economies. It also reflects on the impact of the probable break-up of EU’s currency union, measures to avert the scenario and vulnerable positions of the economies of the USA, China and India to more trouble in the Euro-zone.
The doomsday scenario has been summarized by Martin Wolf of Financial Times (May 17, 2012):
“The mechanisms at work would be powerful: bank runs; the imposition of (illegal) exchange controls; legal uncertainties; asset price collapses; unpredictable shifts in balance sheets; freezing of the financial system; disruption of central banking; collapse in spending and trade; and enormous shifts in the exchange rates of new currencies.
.
Political leadership is crucial to solving the euro area crisis but is currently lacking. Strong leadership is needed to implement difficult reforms and integrate institutions to stabilize economies and manage banking and debt crises. However, modern leadership requires cooperation and input from citizens, which can make leaders appear weaker. The dysfunctional relationship between Germany and France also hinders crisis management. Overall, leadership is challenged by greater integration demands and preference for bilateral over multilateral cooperation.
Financial market stability Final SubmissionPieter Roux
This document provides a summary of the anatomy and dynamics of the global financial crisis that began in 2007-2008. It describes how a crisis in the US subprime mortgage market multiplied into a crisis of staggering global proportions, with initial subprime losses of $250 billion resulting in estimated global GDP losses of $4,700 billion and a decrease in global stock market capitalization of $26,400 billion. The document then analyzes the dynamics of the crisis, tracing how unsustainable trade imbalances and the bursting of the US housing bubble contaminated the global financial system through complex financial instruments. It divides the crisis into two phases: the initial subprime mortgage crisis and run on the shadow banking system, followed by the collapse of Lehman Brothers
The document provides an economic update and outlook for June 2011, noting renewed concerns over sovereign debt in Europe, particularly for Greece, and the potential implications of a default by a Eurozone country. It recommends investors either look at relatively safer international markets like the US and China through ETFs or more globally oriented sectors, and also discusses using covered call strategies during periods of range-bound markets. The debt markets outlook expects rates to remain subdued due to expected impact of higher diesel prices on inflation.
The document discusses policy responses to the Greek debt crisis. It examines the limited options available, which include austerity, default, monetary expansion, and an external bailout. The best response would involve elements of all four - austerity measures and tax enforcement, a targeted expansion of the money supply, private sector cooperation to minimize economic damage, and using existing EU financial mechanisms like the EFSF to distribute costs. A bailout should reestablish credibility while causing minimal contraction for Greece's recovery. Avoiding excessive austerity and default would limit negative economic impacts, while resolving the crisis would boost confidence and reduce risk across the European periphery.
by
Eduardo Levy-Yeyati*
Ugo Panizza**
Inter-American Development Bank
Banco Interamericano de Desarrollo (BID)
Research Department
Departamento de Investigación
Working Paper #581
The Causes of the Global Economic-cum-Financial Crisis_International Relation...Cearet Sood
This document is a cover sheet for a student submission on the causes of the global economic-financial crisis. It provides the student's name, course details, assignment title, word count, and a plagiarism declaration. The main body of the assignment analyzes various contributing factors to the crisis, including the subprime mortgage crisis in the US, the role of mortgage-backed securities and collateralized debt obligations, the failures of Lehman Brothers and other banks, the impacts on markets and economies globally, and regulatory failures. Key events discussed include the housing market collapse, stock market crash, recession in countries like Ireland and Greece, and policy responses by governments and central banks.
The Demographic Dimension of Portugals CrisisEdward Hugh
Portugal faces a looming social and demographic crisis due to an aging population and stagnating economy over the past decade. The author argues that Portugal's most recent economic crisis was not an isolated event, but rather part of an underlying process of population aging slowing growth. As populations age, the proportion of prime working-age individuals decreases, which can reduce economic growth and strain public finances through rising pension and healthcare costs. Portugal has experienced very low fertility rates, rapid population aging, and a reversal from net emigration to net immigration, presenting challenges for its struggling economy.
Harvard Kennedy School: Eurozone Study Jan. 2017 chaganomics
This document summarizes a paper that examines the resilience of the Eurozone in the face of crises. Deep financial integration created interdependence among Eurozone members, providing mechanisms to reallocate resources and absorb economic shocks. Global market pressures forced political leaders to reinforce the monetary union through fiscal and monetary backstops. Ongoing progress on banking supervision and regulation has further strengthened the currency union. While the Eurozone still falls short as an optimal currency area, financial integration may drive further integration through banking reforms, even amid populist opposition to other reforms.
This document introduces Julia, a girl from Castelló and Fortià, Spain who has two houses and enjoys dancing, listening to music, playing volleyball, singing in the shower, going shopping for hours, and eating cakes and sweets while disliking eggs. Her friend Kate Moss describes Julia as a nice, fast-talking girl who loves various hobbies and activities.
This document introduces Julia, a girl from Castelló and Fortià, Spain who has two houses and enjoys dancing, listening to music, playing volleyball, singing in the shower, going shopping for hours, and eating cakes and sweets while disliking eggs. Her friend Kate Moss describes Julia as a nice, fast-talking girl who loves various hobbies and activities.
La Unión Europea ha acordado un paquete de sanciones contra Rusia por su invasión de Ucrania. Las sanciones incluyen restricciones a las importaciones de productos rusos de alta tecnología y a las exportaciones de bienes de lujo a Rusia. Además, se congelarán los activos de varios oligarcas rusos y se prohibirá el acceso de los bancos rusos a los mercados financieros de la UE.
This document introduces Julia, a girl from Castelló and Fortià, Spain who has two houses and enjoys dancing, listening to music, playing volleyball, singing in the shower, going shopping for hours, and eating cakes and sweets while disliking eggs. Her friend Kate Moss describes Julia as a nice, fast-talking girl who loves various hobbies and activities.
Vantage Capital Markets LLP is an independent global brokerage firm with offices in London and affiliated offices in Hong Kong and South Africa. It has operated since 1979 under previous names. Within Vantage Capital Markets, Vantage Global Investment Strategies is a dedicated hedge fund platform that provides macroeconomic research, trade execution, risk hedging, and structured investments for hedge funds. VGIS aims to generate returns for hedge funds through fundamental analysis-driven investment strategies and tailored risk management solutions. It manages long/short model portfolios and has outperformed benchmarks in recent periods.
This document describes an internal communications solution called "Core" that aims to promote organizational culture, position the company brand, and build loyalty. Core works through two main channels - personal contact and content design. It includes services like letters, circulars, intranet publications, and video productions to foster information sharing and generate staff participation and proposals. The goal is effective internal communications to achieve business objectives.
This document lists various design services including store design, communication and brand design, exhibit design, and exhibit stands. It suggests the company offers a range of design services geared towards retail environments, branding, and trade show exhibits.
Eric Nashbar discusses his experience as an entrepreneur, starting with working for and later purchasing businesses like Spike Nashbar and Bike Nashbar. He outlines some of his strategies for running businesses successfully, including focusing on sustainable competitive advantages, reoccurring revenue streams, and high margins. Nashbar also provides examples of how he communicates objectives and measures performance for both direct and indirect reports.
From Operational Effectiveness to Service ExcellenceGary Slater
Business & Enterprise North East adopted Oracle on Demand to improve organizational effectiveness and customer service excellence. The implementation was business-led and helped achieve operational and cost saving goals within 6 months. However, the organization is not fully realizing its vision of a customer-centric model. Adopting social CRM techniques, such as online customer portals and communities, could transform service delivery by putting customers in control and allowing the organization to gain insight from customer experiences and feedback. This would help achieve the ultimate vision of delighting customers.
The Impact of the current Greek financial woes on the global econo.docxcherry686017
The Impact of the current Greek financial woes on the global economy
Introduction
Soon after the implosion of Wall Street in 2008, Greece became the focal point of Europe’s debt crisis. In 2009, Greece announced its deficit figures have been understated for years. This raised concerns across the globe regarding the financial state of Greece and eventually resulted in shutting Greece out of borrowing funds from the financial markets.
By the spring of 2010, Greece was veering toward bankruptcy, which threatened to set off a new financial crisis. The European Central Bank, The European Commission and the International Monetary Fund (IMF) issued a bailout of about 240 billion Euros to Greece.
The bailouts came with conditions. Lenders imposed harsh austerity terms, requiring deep budget cuts and steep tax increases. They also required Greece to overhaul its economy by streamlining the government, ending tax evasion and making Greece an easier place to do business.
The bailout funds were meant to buy some time to help Greece stabilize its finances and allay fears of the European Union breaking up. Though the funds helped to a certain extent, the Greek economy had shrunk by a quarter and unemployment had risen above 25 percent.
Many Greeks and economists, blame the austerity measures for much of the Greece’s continuing problems. While creditors such as Germany, blame Athens for failing to conduct the economic overhauls required under its bailout agreement. They do not want to change the rules for Greece
If Greece defaults, what will happen to the economy?
In the wake of becoming one of the first developed nations to default on their international financial obligations, Greek citizens are hoping that their government strikes a deal to help save them. What exactly is going on in Greece that would cause the country to default, one may ask? Over the past few years, Greece has not been performing well economically. They have experienced increasing levels of the unemployment rate, and their banks simply have not been able to endure the financial crisis. An already high national debt has continued to build up, to the point that the payments due by Greece are almost un-payable. At the very least, the inability to repay debt is a bad signal to all countries and business relationships that the Greeks were a part of. If a deal is not met to help the Greek economy with their creditors on actions to help prevent the debt from growing, as well as repayment, there can be serious consequences.
Greece could default without exiting the Euro. In this scenario, the European Central bank would have to decide on whether or not they want to continue bailing out Greek banks, or put a complete end to aiding the Greek economy. Greece could leave the Euro, and form its own currency. This undoubtedly would have even more adverse effects on the Greek economy. If leaving the Euro-zone is imminent, citizens would begin taking their Euros out of banks. ...
A disturbing fact becomes more and more obvious: The governments of the both the U.S. and most of the Eurozone member countries are about to overstrain their debt servicing capacity.
For individuals, organizations, and countries that have so far regarded the currencies of these countries as reliable storages of value, news could hardly be more alarming: Evidence is rapidly piling up that the debtor governments involved intend to rid themselves of their unsustainable debt largely at the expense of their creditors. This could be effectuated either through a sudden expropriation of lenders (nowadays euphemistically referred to as a “haircut”), or by means of a gradual dispossession through a deliberately induced devaluation.
However, investors currently holding large amounts of Dollar-, or Euro-denominated reserves, do not yet have to resign to the fate of seeing their wealth evaporate through arbitrary acts of governments they had trusted for long. In the document to this message, I have sought to specify some of the basic principles prudent investors should heed in order to protect their wealth from the impending world economic crisis. You may copy and circulate it freely, but would do me a huge favour if you could do so with a reference to my authorship. And, of course, any opportunity you could grant to me to carry its message further afield in person would be most welcome.
A disturbing fact becomes more and more obvious: The governments of the both the U.S. and most of the Eurozone member countries are about to overstrain their debt servicing capacity.
For individuals, organizations, and countries that have so far regarded the currencies of these countries as reliable storages of value, news could hardly be more alarming: Evidence is rapidly piling up that the debtor governments involved intend to rid themselves of their unsustainable debt largely at the expense of their creditors. This could be effectuated either through a sudden expropriation of lenders (nowadays euphemistically referred to as a “haircut”), or by means of a gradual dispossession through a deliberately induced devaluation.
However, investors currently holding large amounts of Dollar-, or Euro-denominated reserves, do not yet have to resign to the fate of seeing their wealth evaporate through arbitrary acts of governments they had trusted for long. In the document to this message, I have sought to specify some of the basic principles prudent investors should heed in order to protect their wealth from the impending world economic crisis. You may copy and circulate it freely, but would do me a huge favour if you could do so with a reference to my authorship. And, of course, any opportunity you could grant to me to carry its message further afield in person would be most welcome.
The document summarizes the issues facing the upcoming EU summit regarding the Eurozone crisis. It discusses the problems that led to the crisis, including the removal of currency risk between Eurozone members and the convergence of interest rates which allowed riskier borrowing. It outlines the consequences of a potential Eurozone break-up, arguing it could trigger another Great Depression. Finally, it proposes several solutions, including greater pooling of sovereignty over bonds and fiscal policy, beefing up the EFSF bailout fund, and continuing to leverage the ECB's balance sheet.
Central banks have engaged in unprecedented monetary stimulus to support financial markets in the short term. However, this risks fueling opposition in both Germany and peripheral European countries in the medium term that could undermine monetary expansion. The greatest investment opportunities currently are contingency arrangements that benefit from very low prices due to central bank actions.
The document discusses several economic and political issues:
1) European authorities have struggled to effectively address the escalating sovereign debt crisis, providing only temporary solutions while the problems get worse.
2) The US debt level has risen significantly due to tax cuts, spending increases, and the financial crisis, reaching nearly 100% of GDP.
3) Emerging markets saw large declines as investors fled to safe havens like US treasuries, though some emerging countries remain attractive long-term investments due to growth and demographics.
4) South Africa faces economic challenges including slowing growth compared to other emerging markets, while political risks also loom over policy and foreign investment.
The public debt crisis is not limited to Greece or to the Euro area. In fact, several developed economies face rapidly growing debt-to-GDP ratios, which raise doubts about their long-term solvency. Thus, suggesting that the Eurozone is undergoing a currency crisis or is in danger of disintegration is not the right diagnosis (or at least premature). However, if prudent fiscal policies, fiscal discipline and far-reaching structural reforms are not undertaken soon, both the EU and EMU may face serious internal tensions and obstacles to future economic growth.
Authored by: Marek Dąbrowski
Published in 2010
The document discusses the ongoing Greek debt crisis and potential bailout options. It notes that while France, Germany, and the Netherlands were reported to directly or indirectly bailout Greece, the German Chancellor denied such plans. However, the document argues that a bailout through government-owned financial entities guaranteeing Greek bond purchases remains a real possibility. It also considers that the IMF involvement may become inevitable eventually due to the scale of Greece's debt problem and flaws in the European monetary union. The crisis presents an opportunity for Europe to reform the EU and eurozone on more solid foundations.
The document discusses three potential scenarios for the disintegration of the Eurozone: (1) the voluntary exit of a peripheral country like Greece; (2) the involuntary exit of a peripheral country due to sovereign default or banking crisis; (3) the voluntary exit of a core country such as Germany if inflation rises and the euro's value falls. Each scenario could have significant economic and political costs for the exiting country and remainder of the Eurozone. Analyzing even worst-case scenarios may help policymakers avoid policy mistakes and better understand the challenges involved in crisis management.
The document discusses the future of the Euro currency. It examines whether the Euro is facing a rebirth or demise amidst the ongoing financial crisis. It analyzes the weaknesses within the Eurozone that have been exposed by the crisis. It also discusses the need for further European financial and political integration, including a fiscal union, for the Euro to survive long term. However, it notes that achieving this unification faces significant opposition from Germany. The future of the Euro thus remains uncertain and dependent on whether more unified governance can be established within Europe.
What if-the-eurozone-breaks-up ? Finland’s exit of its own accordYannick Naud
1. Greece leaving the euro would lead to the devaluation of the new Greek currency and consume Greek bank deposits.
2. Greece's exit could trigger other weak eurozone countries to exit, potentially leading to a eurozone breakup.
3. For the eurozone to remain stable, credible firewalls are needed to protect banking sectors and disconnect them from struggling governments. Without effective crisis management, the financial system could collapse and the euro could be abolished.
Eurozone Crisis : A case study on GreeceAniket Pant
Our group was required to do a presentation for Financial Management on the Euro Zone Crisis. We took the example of Greece and did the study. Here are our slides.
This document is a student project analyzing the impacts of the Eurozone debt crisis on developing countries. It discusses the evolution of the crisis, global forces behind it, and potential short-term and long-term impacts on developing economies through falling market capitalization, commodity exports, remittances, and long-term manufacturing declines. The conclusion calls for stronger financial cooperation between developing countries to help them weather global financial crises stemming from issues in wealthy nations.
For the last 6 years, Greece has been a country burdened with bad debt and the threat of default on loans that will take more than a few generations to pay back. During that time, the economy has failed to improve, and again Greece is potentially on the verge of defaulting on its loan obligations, and leaving the European Union.
Citibank - Market Outlook September 2012Denny Setiady
Possible Grexit looming in the next 6-12 months with a 90% probability. Key upcoming meetings and events in September could impact the outcome, including a German court ruling on bailout funds and a Dutch election. If Grexit occurs, it would likely involve capital controls and currency adjustments in Greece, but the response from other countries and institutions would be substantial to prevent contagion. However, Grexit may not solve the underlying issues in the Eurozone and further restructurings are still expected.
It’s good to understand Europe’s debt crisis and why it’s affecting
U.S. markets. Here’s an overview of how the European Union
operates, why the euro is in danger, and what the crisis could mean
to American investors.
The document summarizes the key stages of the Eurozone crisis from 2007 to 2011. It began with the seizure of the banking system in 2007 due to subprime mortgage debt. It discusses the stages including the bankruptcy of Lehman Brothers in 2008, the $5 trillion fiscal expansion committed by G20 leaders in 2009, the shift to concerns over government solvency in 2010, and the downgrade of US debt to AA+ in 2011. The crisis spread from the periphery to the core of the Eurozone, with bailouts of Ireland, Portugal, and multiple bailouts of Greece. Key factors fueling the crisis were slowing growth, rising debt levels, vulnerable banks, and lack of political leadership. The document also analyzes Europe's
Fasanara Capital | Investment Outlook June 2012 (published May 25th)Fasanara Capital ltd
1) The document provides an investment outlook from Fasanara Capital discussing recent market movements and their views on the European sovereign debt crisis.
2) They expect further market declines are needed to motivate coordinated policy intervention, but maintain shorts as catalysts like political tensions could accelerate declines and trigger action.
3) Long-term structural issues in Europe like high unemployment and economic imbalances remain unresolved and increase the risks of scenarios like inflation, defaults or countries leaving the Euro.
Similar to Vgis macro the pigs and the emu lost decade (20)
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Chapter wise All Notes of First year Basic Civil Engineering
Syllabus
Chapter-1
Introduction to objective, scope and outcome the subject
Chapter 2
Introduction: Scope and Specialization of Civil Engineering, Role of civil Engineer in Society, Impact of infrastructural development on economy of country.
Chapter 3
Surveying: Object Principles & Types of Surveying; Site Plans, Plans & Maps; Scales & Unit of different Measurements.
Linear Measurements: Instruments used. Linear Measurement by Tape, Ranging out Survey Lines and overcoming Obstructions; Measurements on sloping ground; Tape corrections, conventional symbols. Angular Measurements: Instruments used; Introduction to Compass Surveying, Bearings and Longitude & Latitude of a Line, Introduction to total station.
Levelling: Instrument used Object of levelling, Methods of levelling in brief, and Contour maps.
Chapter 4
Buildings: Selection of site for Buildings, Layout of Building Plan, Types of buildings, Plinth area, carpet area, floor space index, Introduction to building byelaws, concept of sun light & ventilation. Components of Buildings & their functions, Basic concept of R.C.C., Introduction to types of foundation
Chapter 5
Transportation: Introduction to Transportation Engineering; Traffic and Road Safety: Types and Characteristics of Various Modes of Transportation; Various Road Traffic Signs, Causes of Accidents and Road Safety Measures.
Chapter 6
Environmental Engineering: Environmental Pollution, Environmental Acts and Regulations, Functional Concepts of Ecology, Basics of Species, Biodiversity, Ecosystem, Hydrological Cycle; Chemical Cycles: Carbon, Nitrogen & Phosphorus; Energy Flow in Ecosystems.
Water Pollution: Water Quality standards, Introduction to Treatment & Disposal of Waste Water. Reuse and Saving of Water, Rain Water Harvesting. Solid Waste Management: Classification of Solid Waste, Collection, Transportation and Disposal of Solid. Recycling of Solid Waste: Energy Recovery, Sanitary Landfill, On-Site Sanitation. Air & Noise Pollution: Primary and Secondary air pollutants, Harmful effects of Air Pollution, Control of Air Pollution. . Noise Pollution Harmful Effects of noise pollution, control of noise pollution, Global warming & Climate Change, Ozone depletion, Greenhouse effect
Text Books:
1. Palancharmy, Basic Civil Engineering, McGraw Hill publishers.
2. Satheesh Gopi, Basic Civil Engineering, Pearson Publishers.
3. Ketki Rangwala Dalal, Essentials of Civil Engineering, Charotar Publishing House.
4. BCP, Surveying volume 1
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Vgis macro the pigs and the emu lost decade
1. VANTAGE
GLOBAL INVESTMENT STRATEGIES
Wednesday, 10 February 2010 Macroeconomic Research & Global Investment Strategies
Is the European Monetary Union on the
brink of a lost decade?
The turmoil in which Greece has lately found itself has placed the entire Eurozone
into the spotlight, against all expectations. Long regarded as a safe and stable
harbour – though plagued with low below-average growth –, the ten-year old,
sixteen-member strong union is possibly undergoing its more severe test ever.
Chinks had arguably appeared in the credibility armour of several late joiners –
such as Spain, Portugal and Greece –, but the towering presence of the European
Central Bank and the assumed German support was deemed good enough to justify
a wide convergence of spread levels throughout the last decade. The credit crunch
and its consequences have completely reshuffled the deck: a new, far more
uncertain era may be about to open for the Eurozone.
Urgent intervention needed: The trouble with which Greece has been battling
recently could well be a first instalment of far more damaging action. We do believe
that leaving the problem alone will not suffice to solve it: an intervention (initiated
from the ECB, fellow EMU-members or the IMF, by decreasing order of cost
efficiency) is urgently needed. Recent talks about bilateral support from Germany are
welcomed in the short term, but won’t be enough in the longer term.
Double dip recession risk: This sovereign crisis could even be the spark that
lights the double-dip powder in Europe at least. If there is no immediate reaction
from the ECB, EMU members or the IMF, we regard this outcome as likely, and
Fahd Rachidy advocate cutting back on exposure to European stocks for some time.
Phone: +44 (0)20 3107 5373
Some options are not sustainable: Outright default won’t be permitted, fiscal
email: frachidy@vcmllp.com
and budgetary reforms won’t be sufficient to curb the debt crisis, and any economic
recovery won’t happen in the short term. Spain is more important than Greece in
Frederic Bonnevay the EMU: dealing with Athens without taking care of Madrid’s disease in the same
Phone: +44 (0)20 3107 5370 time will be a short-lived placebo.
email: fbonnevay@vcmllp.com
Two credible solutions left for a technical bailout?
• Explicit Sovereign Quantitative Easing from the ECB: the Central Bank could
directly buy government paper of Greece, Spain, Portugal or other members
of the Eurozone area. But this option is limited in time and quantity.
• Creation of a Eurozone Stabilisation Fund, as a means of mutual support
from ALL members, and - most importantly - as a way to provide liquidity
and buy time for euro sovereigns who need to make fiscal adjustments.
2. VANTAGE GLOBAL INVESTMENT STRATEGIES
Tuesday, 9 February 2010 Macroeconomic Research & Global Investment Strategies
Introduction
Inaction is not permitted, In every major crisis you don’t really have much choice. You cannot choose
decisions urgently needed between inaction and action, because ultimately you will be forced to act.
You do not really choose between bailout and no bailout, because very soon
you find that all the reasonable options involve some sort of bailout for some
people (and not for others). And, try as you might, there is no way to choose
to let your neighbors fail completely - because that failure has such awful
consequences for their citizens and, in all likelihood, for your banks, that you
finally come across with the money.
Only the form of assistance But you do have a choice on when to come to help your neighbors and your
leaves limited options friends, and you can definitely choose the form of this assistance. If you come
in earlier and in a more systematic fashion, the cost for everyone is lower
and the chances of a fast recovery are stronger.
And bailout is not one of The sensible decision might seem obvious from a distance or in retrospect, but
them… it’s this exact choice that the richer and more stable countries in Western
Europe are now struggling with. However, one should not forget that EMU
members have signed a Eurozone no-bailout’s clause with the Maastricht
Treaty…a German request at that time.
Much as it was necessary to let Lehman Brothers go down the pipe before
bailing out the remaining banks, will it be necessary to let a profligate
government default and ask for IMF assistance before punching a hole in the
no-bailout clause?
A remedy worse than the In a way, the current situation can be viewed as a neat illustration of the
disease? winner’s curse: costly unorthodox measures implemented by central banks
worldwide, forcefully throwing newly created money at then-fragmented
markets to curb yields, have successfully led investors to pile into sovereign
paper. Now that such « artificial » support is being removed – as was already
(or is bound to be) announced by monetary authorities – and as the ever rising
tide of capital inflow abates, debt holders suddenly realize just how badly
public finances have fared over the past two years, and feverishly question the
de facto solvency of the most fragile States. This sequence may look familiar
to any keen observer of sovereign debt history. There is, however, one crucial
difference between the current – admittedly still mounting – crisis and those
of 1994, 1997-98, and 2001-02: this time, industrialized countries, rather
than emerging markets, find themselves in the eye of the storm.
While far from being the only State to have suffered a credibility blow in
recent weeks, Greece is thus far facing the perfect storm. With spreads
between Greek paper and German Bunds skyrocketing by the day, abysmal
deficits – making a mockery of Maastricht’s Stability and Growth Pact-defined
criteria –, and fellow Eurozone members sending lukewarm signals when
asked about the possibility of a bail-out, the Papandreou administration has its
back against the wall. The choices that it is left with seem equally unpalatable:
a prolonged period of fiscal profligacy, along the lines initially advocated by
the ruling left-wing PASOK, would bring the country to ruin and precipitate the
much-feared default; on the other hand, too sharp a U-turn towards budget
austerity would choke domestic consumption and growth.
The debt crisis is rapidly Worse still, the Greek debt disease has started to propagate throughout the
spreading to other EMU EMU, as the financial health of Portugal, Spain, Ireland (and possibly Italy) is
members being challenged by nervous market participants. A widening rift is dividing
Page 2
3. VANTAGE GLOBAL INVESTMENT STRATEGIES
Tuesday, 9 February 2010 Macroeconomic Research & Global Investment Strategies
the Eurozone into two groups – Germany, France and the Benelux, on the one
hand, the so-called « PIGS », on the other. Not only does this bode extremely
poorly for the ten-year old monetary union’s future, but this could also very
well prompt a second, generalized market collapse – putting an end to what
would have then been a short-lived, if powerful, technical rally.
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4. VANTAGE GLOBAL INVESTMENT STRATEGIES
Tuesday, 9 February 2010 Macroeconomic Research & Global Investment Strategies
Exceptional measures for exceptional times: crisis and
response
The towering costs of public response
Financing heavily imbalanced budgets left debt as the only option on the
table: nearly USD 12,000bn were raised by OECD countries in 2009 compared
to just USD 10,000bn two years earlier, not only overburdening State with
new liabilities, but also jeopardizing the long-term equilibrium of capital
markets.
According to IMF projections (Source: World Economic Outlook, October
2009), the United States bears a (central government) public debt of 58.2% of
GDP, when Germany and France have already surpassed the 70% threshold,
some thirteen points above 2007 levels in Berlin’s case, not to mention Italy’s
113% and Greece’s ca. 170% (or EUR 300bn) levels.
Heavy debt is not the issue by The absolute level of debt may not, by itself, be a relevant indicator when it
itself… comes to measuring sustainability: a high debt stock, if easily refinanced and
combined with a manoeuvrable budget, a competitive economy as well as fast
growth rates, is clearly no cause for concern. In fact, the trouble is that none
of these conditions is satisfied.
• First, refinancing such vast pools of mostly short-dated paper will
not be easy. Deeper deficits in most debtor countries have translated
into higher, concomitant capital raising needs. Most issuers – both
public and private – have rushed to the market last year in the hope
of benefitting from extraordinarily favourable conditions: a record
USD 14,000bn of investment grade paper was issued in 2009. Public
…But short term paper auctioned by OECD countries consisted essentially of short-
refinancing, budget inertia dated securities: over 70% of total volume in the United States against
and countercyclical around 52% in the Eurozone. Hence, most governments will have to
measures are. come to the market again over the coming months: yet, without
continued QE support, there is no guarantee that the auctions will
proceed as smoothly as they have last year.
• Second, budgets are all but manoeuvrable. The extreme measures
taken by most governments carried the embedded cost of near-
permanence. Steep tax cuts, initiatives directed at the industrial
sector and stepped-up benefits cannot be removed just as briskly as
they were introduced, due to both political and economic realism. The
early winding down of ‘cash-for-clunkers’ programmes has already
taken a toll on growth – a warning sign that has not left governments
indifferent.
• Third, competitiveness and growth rates were probably hindered by
the crisis and the subsequent public stimuli. Not only has the huge
drop in orders stomached by companies until mid-2009 driven
capacity reductions, but countercyclical « backstops » will inevitably
translate into higher taxes and production costs – making growth
generally more tepid and less resilient than it was before.
All in all, what seems most problematic arose not so much from deeper
deficits and increased debt levels, strictly speaking, but far more their near-
permanent nature and for the tensions that the short-dated claim refinancing
effort will continue to generate. The Greek episode is probably a mere omen
of a far deeper crisis.
Page 4
5. VANTAGE GLOBAL INVESTMENT STRATEGIES
Tuesday, 9 February 2010 Macroeconomic Research & Global Investment Strategies
Fig. 1: 2009 Gross Marketable Debt Issuance
Source: OECD Projections
Table 1: Short Term Issuance Projection (USD bn)
ST Issuance Projection % of Short Term
2009 (USD bn) Issuance
North America 5350 70.4%
Euro zone 802 52.2%
Other Europe 156 28.5%
Asia - Pacific OECD 267 20.3%
EM OECD 73 35.9%
TOTAL OECD 6648 59.4%
Source: OECD Projections
Table 2: Change in Borrowing
Change in Gross Change in Gross Change in Gross Change in Net
Borrowing Borrowing Borrowing Borrowing
2007-2008 2007-2009 2008-2009 2008-2009
North
America 47.6% 59.7% 8.2% 46.1%
Euro zone 26.8% 56.5% 23.4% 84.9%
Other Europe 83.6% 116.2% 17.8% 75.7%
Asia - Pacific
OECD 5.1% 8.6% 3.3% 197.1%
EM OECD -4.4% 3.8% 8.5% 71.2%
TOTAL OECD 37.1% 51.5% 10.5% 61.5%
Source: OECD Projections
Page 5
6. VANTAGE GLOBAL INVESTMENT STRATEGIES
Tuesday, 9 February 2010 Macroeconomic Research & Global Investment Strategies
A Pyrrhic victory over the credit crisis
Countercyclical measures Strange as it may seem, the remedy could well have been worse than the
swiftly implemented by disease. The standalone impact of the credit crisis has undeniably drained
most OECD members only fiscal revenues, as corporate profits waned, income tax receipts crashed, and
aggravated the trend VAT-derived payments fell due to consumption weakening. But the
countercyclical measures swiftly implemented by most OECD members only
aggravated this trend: stabilizing measures, first aimed at reassuring tense
investors and restoring financial market to a normalized trading regime, at
kick-starting banking credit, and at supporting private demand, surely did not
come free. Huge public deficits, dwarfing any of those witnessed over the past
decades, soon followed.
Germany’s 5% budget imbalance last year – corresponding to a shortfall of
over EUR 85.8bn to which a belated EUR 14.5bn had to be added as a
consequence of last-minute fiscal stimulus enacted by the first Merkel
government – compares poorly to 2007’s near-equilibrium. France’s 8.1%
deficit (or around EUR 150bn) leaves little hope of narrowing swiftly over the
next few years, in spite of the administration’s spending cut rhetoric.
Greece, this quarter’s worst offender by far, announced an even more
startling 12.7% deficit – over four times the floor imposed by the Stability and
Growth Pact –, and admitted to having cooked its books for gaining Eurozone
admission. Other members of the now infamous ‘PIGS’ group, though not in a
comparable state of despair, shared a common and alarming trait: their
domestic growth engine, fuelled by consumption and foreign direct
investment (notably in real estate, in the case of Spain), had come to an
abrupt halt. In other words, the extent of the damage inflicted by the credit
crisis had by and large been frozen by emergency measures taken at the turn
of 2009 – but the real test remained ahead. The Portuguese budget deficit
rose from 2.7 per cent of gross domestic product in 2008 to a record 9.3 per
cent last year. Public debt is expected to hit a 20-year high of 85.4 per cent
this year. Spain's deficit rose to 11.4 per cent of GDP last year, and its public
debt, although low by Eurozone standards, is rising. In addition, Spain has
been running a trade deficit for the last decade.
Are PIGS bonds junk bonds? Greek strike prospects helped send the 10yr Greek/German spread up 10bps
to 360, and Portugal edged up to a new 10-month high of 163; and Spain
settled just over the 100bps mark. The latter occurred even as Spain
announced that its net bond issuance this year would be 34% less than last
year and promised to cut spending as necessary. For the latter two markets, it
seems the pressure will remain for spread widening (despite offering adequate
risk premiums in our view) until there is solid progress on either the fiscal
front or an EU pledge to provide emergency relief/ guarantees if called for.
In the meantime, uncertainty prevails, as does the risk that the Iberian
peninsula spreads could break to new post-EMU highs. After all, while
Greece has widened by 220bps since the end of October, Portugal has
widened by half that and Spain by just 45bps.
Page 6
7. VANTAGE GLOBAL INVESTMENT STRATEGIES
Tuesday, 9 February 2010 Macroeconomic Research & Global Investment Strategies
Eurozone’s structural weaknesses revealed
Latent imbalances
Were PIGS enjoying an EMU Indeed, lack of fiscal discipline in Greece – and in other ‘PIGS’ countries – is
free ride? hardly news. For the best of the past ten years, the government has posted
deficits far larger than was allowed by Maastricht’s SGP, while also largely
letting its sovereign debt rise steadfastly. The « low accuracy » of Greek
statistical releases, furthermore, was a secret to no one, including when the
country was first admitted to the union. Spain’s own statistics, on the other
hand, were probably less unreliable, but possibly no less deceitful, as the
budget surpluses amassed over the last decade where chiefly the result of
powerful investment inflows – leaving the Spanish economy in a very frail
position.
German and ECB’s Dropping the drachma and the peseta, though, was a mixed blessing. The
protection is not enough advantages were, self-evidently, numerous: far cheaper borrowing
anymore. conditions, thanks to converging debt spreads, a stable currency, protective of
investment flows, reinforced commercial ties to other member countries –
and, not least though stunningly for the naive, a license for fiscal carelessness.
The existence of a Stability and Growth Pact was enough to convince investors
that nothing could ever happen to Greek or Spanish solvency, protected as it
was by the joint shield of Frankfurt and Berlin, and a relatively stable capital
market environment proved them almost continuously right: they merely
enjoyed the relative premium paid by Madrid or Athens-issued paper.
This equilibrium, however, was altogether – though not completely
obviously – very frail, dependent as it was on German means and goodwill.
The imposing FRG-GDR reunification bill had apparently been footed without
harm, so providing a modest financial lifeline to a fellow Eurozone member did
not seem as too great a cost against the likely adverse currency movements
that the mere possibility of a sovereign default would necessarily cause.
From free ride to free lunch to free fall
Peripheral countries thought that they could therefore safely play this « free-
riding » game forever. 2008’s credit crisis came as an unwelcome reminder of
the extremely hypothetical foundations on which convergence relied. The
financial tremor hit Germany badly enough to justify a political repositioning
of the Merkel administration, focused on bailing out its breathless and toxic
asset-ridden Landesbanken, while also pulling its vital exporting sector out of
recession.
Leading to a complete risk As Germany licked its wounds and announced unflattering, dark red deficit
reassessment figures, investors started to worry about the exact worth of their erstwhile
assumptions, shortly thereafter coming to a complete risk reassessment of
sovereign paper – and sending Greek (later Spanish and Portuguese)
government bond yields through the roof – validating the downgrades
inflicted by rating agencies (now standing at BBB+ and A2 with S&P and
Moody’s, respectively, still eligible for ECB monetary policy operations, where
the minimum rating is BBB- since October 2008 and until further notice).
Page 7
8. VANTAGE GLOBAL INVESTMENT STRATEGIES
Tuesday, 9 February 2010 Macroeconomic Research & Global Investment Strategies
Fig. 3: 10yr Sovereign Curve Yields (%) – Greece, Spain, Germany and Portugal
Source: Bloomberg
The vicious nature of this situation is made clear by the late consequences it
has had on Iberian debt, and on the euro – hitting the former paper by classic
credit contagion mechanics (much like those that applied in 1997 in Indonesia
and South Korea, prey to Thai speculative bouts of fever), and deteriorating
further the trend of EURUSD appreciation.
Page 8
9. VANTAGE GLOBAL INVESTMENT STRATEGIES
Tuesday, 9 February 2010 Macroeconomic Research & Global Investment Strategies
Three scenarios
This nascent debt crisis could have dire consequences. The magnitude of the
recent action seems excessively violent. It could still cause grim decisions to
be taken on the domestic, European or international front. The evolution of
the Spanish and Greek issue will likely determine the outcome of the entire
process, provided that fast initiative is taken to restore credibility. We study
three possible scenarios before turning to our probabilistic assessment and
corresponding investment recommendations.
1/ Outright default
An outright default, while technically possible, is unlikely.
The consequences of the Greek turmoil have thus far been limited to some
EURUSD easing (beneficial to the exporting members of the EMU – chiefly to
Germany) and to some flight-to-quality action on the government bond
market (again, beneficial to Bunds). An outright default would send the
Eurozone into a legal void widely perceived as much too detrimental and
harmful not to be avoided by all means. It would also greatly hurt German
and French banks – with a respective EUR 43bn and EUR 75bn exposure to
Greek government debt (of all kinds) in Q3 2009, according to the BIS – far too
hard to be tolerable. The same reasoning applies to Spain and Portugal,
where German banks held claims of over EUR 240bn compared to French
banks’ EUR 195bn and Dutch institutions’ EUR 127bn.
We do not think that neither the ECB nor the EMU will let Athens, or Madrid,
or Lisbon, fail to pay its creditors. Both economical and political costs would
be catastrophic for European countries. For the same reason, opting out from
the Eurozone does not appear as a credible scenario, and therefore
devaluation will not happen, unless EMU members suddenly decide to kill
forever the 50 years old European construction.
2/ Normalisation and new sources of tax revenue
We do not think that fiscal and budgetary reforms will be sufficient to curb
the debt crisis, and any economic normalisation will not happen in the short
term.
Greek’s plan failed to George Papandreou, the Greek Prime Minister, has already presented an
convince… incredible reform plan to Brussels – and to the market – that draws a roadmap
to deficit reduction and debt stabilization. This plan, which targets an
appalling 9.7% budget balance improvement « by 2012, » all too logically
failed to convince: either this pledge amounts to a promise of dismantling the
Greek State over twenty-four months, or it is a thinly disguised wisecrack to
please investors. In both cases, anyhow, the result does not sound very
satisfactory – hence the renewed tensions on Athens’ paper. Yesterday,
Greece says it will cut public sector wages by as much as 5.5%. This comes
after a variety of other revenue-raising plans such as raising the income tax
rate for incomes between EUR60k and 75k.
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Fig. 2: 5yr CDS for Greece, Spain and Germany
Source: Bloomberg
…and so did the Spanish Spain’s repeated stimulus effort and bleak growth outlook (due to dried up
one investment) might justify some risk revaluation (as does, to a much lesser
extent, Portugal):
Spanish economic Minister Elena Salgado, in a London this week, has
announced a new tax reform bill. Among the key elements, we highlight the:
• introduction of a unified progressive tax scale for income from all
sources
• abolition of autonomous taxation and tax exemptions in personal
income and corporate earnings
• treatment of distributed earnings as personal income
• reintroduction of a progressive tax on large property
• effective taxation of off-shore companies
Markets are notoriously moody, and hypersensitivity simply cannot last
forever. Credible fiscal and budgetary disciplines are urgently needed,
though they would initially have a countercyclical effect. Cutting spending
and raising taxes will help refinancing, but the short term effect won’t be
sufficient and Spain and Greece currently lack political credibility, and will
have to face social unrest. In addition, both countries (and other Euro
members) are facing scary demographic challenges that will further pressure
their political ability to push for reforms.
Better-than-expected unemployment numbers, an upturn in consumption, a
resurgence of bank credit or solid corporate earnings could curb the current
pressure. In other words, the situation could normalize by itself, letting
Greece, Spain and Portugal escape the turmoil more or less unscathed. This
solution, unfortunately, does not look ready to materialise just yet, and we
believe that any form of easing tensions will necessarily have to be prompted
by an external intervention.
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3/ Bail-out
A bail-out is an alternative. This can come into two forms, of two kinds each:
actual (funded) or promissory, EMU- or IMF-initiated.
Clearly, a Dubai-alike solution would scare markets to death and would also be
very costly – directly and indirectly. So there is a good chance that, unless
Athens is on the brink of financial implosion (which we think it is not,
independently of its longer-run solvency), someone will come to reassure
investors by guaranteeing, one way or another, that help will be provided if
needed.
An IMF intervention would be a political blow to the Eurozone’s ambitions: it
remains, nonetheless, very possible. Much more likely though is a Berlin- or
a Frankfurt-driven intervention.
Germany’s Chancellorship (or Ministry of Finance) is now trying to publicly and
unambiguously moot some form of EMU-solidarity: this would certainly be
effective immediately, but remains remote, due to the political cost thereby
transferred to Berlin and the lack of any credibility improvement on Athens’
the beneficiary State’s part. (It should be added that this move would, strictly
speaking, not be compliant with European law: verbal support may well be
useful, but an effective bail-out would be far more problematic, due to the
non bailout clause.)
An ECB solution, on the other hand, is perfectly feasible and far less costly.
Enabling PIGS debtor countries to refinance their budget and protecting
them against adverse yield shocks can be done:
(i) by publicly promising banks to accept Greek they considered
sovereign paper as collateral irrespective of ratings (while also
restricting other private securities so as to prompt a net increase in
demand for Athens’ those bonds). The problem in this case is that the
institution’s President, Jean-Claude Trichet, has already voiced the
board’s intention not to « change [its] collateral policy for the sake of
any particular country »: any U-turn dictated by recent events would
harm the ECB’s standing.
(ii) by engaging into explicit quantitative easing, whereby the ECB
would simply grow its balance sheet by purchasing the targeted
government paper on the open market, sending a clear signal to all
investors and easing yield tensions.
This is, nonetheless, not a one-size-fits-all solution: the individual situations
of Athens and Madrid require different remedies. The ultimate decision
taken by public authorities will rely on a comparative cost-to-benefit analysis
on both political and economic grounds.
The economic gain of bailing out Greece is small: Greek economy’s limited
importance to the EMU’s GDP does not, we believe, justify a breach to EMU
rules or even a credibility loss for the ECB. The political gain of not letting an
EMU country default or be rescued by a third-party may be much larger:
whether or not Greece is abandoned to its fate and to the goodwill of the IMF
thus depends largely on purely political considerations.
Spain’s situation is far more intractable: the country’s weight inside the
Eurozone and its key position in the union’s political arena would make an
outside intervention (let alone a default) intolerably – perhaps terminally –
costly. Madrid’s debt may not yet be as closely watched (and volatile) as that
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Tuesday, 9 February 2010 Macroeconomic Research & Global Investment Strategies
of Athens, but runs unmistakably much deeper. Neither a « credit event » nor
an IMF bail-out are credible options: should Spain’s situation continue to
worsen, there is little doubt that the ECB and the members of the Eurozone
will be ready to risk their stature to stave off a fatal accident.
Conclusion – Investment recommendations
The EMU’s decade-old financial stability and subsequent government bond
yield convergence has relied on the myth of solidarity. Berlin’s light-heartedly
prognosticated support miraculously turned leaden deficits and debt burdens
into political gold within Mediterranean new joiners. This misunderstanding
could simply not last forever: the credit crisis has aggravated every debtor
country’s own problems, and led to a resurgence of idiosyncratic risk. Greece
has pledged fiscal frugality. Ireland’s government faces a rocky road as it
pushes to cut wages. Spain’s deficit has also exploded, and Italy’s public sector
debt as a share of gross domestic product is around Greek levels
QE removal and increased (as well as synchronous) short term refinancing
needs should weigh on the least solvent issuers’ yields over the coming years.
The trouble with which Greece has been battling recently could well be a first
instalment of far more damaging action. We do believe that leaving the
problem alone will not suffice to solve it: an intervention (initiated from the
ECB, fellow EMU-members or the IMF, by decreasing order of cost efficiency)
is needed.
While the euro is not immediately threatened, we still anticipate further EUR-
USD weakening over the coming months – at least for as long as the EMU
sovereign paper issue remains an ongoing concern. Flight-to-quality effects
should benefit Bunds and OATs, both of which should see their front-end
yields tighten. (Relatively speaking, though, the Bund should still fare better.)
Further widening on Spanish Bonos is likely, while Greek government bonds
will stay highly volatile, jumping on each rumour and fresh piece of news.
Such uncertainty will inevitably damage the sustainability of the wider
rebound. In the worst-case scenario, this sovereign debt crisis could even be
the spark that lights the double-dip (or, at least, the momentum-abating)
powder.
If there is no immediate reaction from the ECB, EMU members or the IMF, we
regard this outcome as likely, and advocate cutting back on exposure to
European stocks for some time.
One solution (apart from ECB sovereign QE) could be the creation of a
Eurozone stabilization fund, as a means of mutual support and - most
importantly - as a way to provide liquidity and buy time for euro sovereigns
who need to make fiscal adjustments. Creating a European Stability Fund with
at least €2tn of credit lines guaranteed by all Eurozone member nations and
potentially other European countries with large financial systems such as
Switzerland, Sweden and the UK could provide alternative financing to
member countries in case market rates on their government debt become too
high. This would prevent a self-fulfilling cycle of rising interest rates. The fund
should be large enough to have credibility; countries could access the fund
automatically, but should then adopt a 5-year program for ensuring financial
stability, subject to peer review within the Eurozone.
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It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is also
not subject to any prohibition on dealing ahead of the dissemination of investment research, although as the views expressed in this note are
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14. VANTAGE GLOBAL INVESTMENT STRATEGIES
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