Fasten Your Seat Belts: Tumultuous ,Times Ahead

[Ernst Debets]

REPLY TO: D66 at nic.surfnet.nl

Begrijp hieruit dat Griekenland crisis een vervolg krijgt in Spanje daarna
in Ierland. Letland en Litouwen tellen we niet mee, want die hebben geen
Euro.

Ernst Debets/
Zaanstad

-----Oorspronkelijk bericht-----
Van: owner-d66 at nic.surfnet.nl [mailto:owner-d66 at nic.surfnet.nl] Namens Cees
Binkhorst
Verzonden: zondag 28 februari 2010 8:47
Aan: Discussielijst over D66
Onderwerp: Fasten Your Seat Belts: Tumultuous ,Times Ahead

REPLY TO: D66 at nic.surfnet.nl

The United States is eighth, just after Iceland.

Groet / Cees

PS. Andere tijden, andere rapporten (oftewel: evolutie van het rapportburo)

http://www.finfacts.ie/irishfinancenews/article_1018682.shtml
Moody's, the international ratings agency has ranked Spain as top of its
Misery Index  - - a metric which adds a country's fiscal deficit and the
unemployment rate - -  and Ireland gets a fourth ranking.

Spain, is followed by Latvia, Lithuania, Ireland, Greece and the UK. The
US is eighth - - just after Iceland.

The original "misery index"  - - an addition of inflation and the
unemployment rate  -- was invented by economist Arthur Okun in the
1970's while he was a scholar at the Brookings Institution in Washington
DC. Previously he had served as a member of President Lyndon Johnson's
Council of Economic Advisers and a professor at Yale.

The timing of the invention of the term "misery index" coincided with
what was called "stagflation" - -  a time of no growth but with both
high inflation and high unemployment.

The ratings agency said on Tuesday that buyers of gilts were not likely
to continue supporting countries unless credible plans to restore public
finances to health, were unveiled.

"For most of 2009, the assumption was that governments could decide on
the timing: first react to the crisis, then announce future plans, and
finally implement,"Moody's said."Such an assumption may be proven
wrong... Aaa countries will probably not have the luxury of waiting for
the recovery to be secured before announcing credible fiscal
consolidation plans."

2010 may prove to be a tumultuous year for sovereign debt issuers, says
Moody's Investors Service in its first annual "Sovereign Risk: Review
2009 & Outlook 2010" report titled "Fasten Your Seat Belts: Tumultuous
Times Ahead" (available publicly to subscribers). The rating agency's
view is based on the uncertainties surrounding the likely pace and
intensity of fiscal and monetary exit strategies as governments start to
unwind quantitative easing programs.

Indeed, according to Moody's, the only certainty is that the exit
strategies will be fraught with a good deal of execution risk. "The key
  policy challenge facing advanced economies is to time the exit
perfectly: not too quickly or too soon so as to prevent choking off
growth; and not too slowly or late so as not to unsettle financial
markets," says Pierre Cailleteau, Managing Director of Moody's Global
Sovereign Risk Group.

Moody's new report says that the context for sovereign risk assessment
has changed dramatically since the beginning of the crisis in mid-2007.
"This is mainly because of the crisis of public finances that has beset
many rich countries in what Moody's believes will be the final -- and
disturbingly long-lasting -- stage of the crisis," says Cailleteau.

Moody's report provides a brief review of 2009, focusing on the rating
agency's interpretation of the challenging events that were triggered by
the bankruptcy of Lehman Brothers in late 2008. The report then provides
an outlook for 2010 and identifies the key themes which Moody's believes
will shape the state of sovereign risk in 2010.

"The overriding theme is that 2010 will at best see a 'normalization'
and at worst a severe tightening in government financing conditions,"
says Cailleteau. Long-term interest rates may increase more rapidly than
expected, driven by the slow unwinding of quantitative easing. The end
to exceptionally low financing conditions will expose the true cost of
the crisis on government debt affordability across the world.

A further key theme is that Aaa governments will probably not have the
luxury of waiting for the recovery to be secured before announcing and
perhaps also implementing credible fiscal consolidation programs.

Moreover, as most governments simply cannot afford another financial
crisis, they will attempt to ring-fence their balance sheets from
selected contingent liabilities. "This could in some cases create
disorderly market conditions," cautions Cailleteau.

Moody's also notes that euro membership will protect some countries
against liquidity risk but not against long-term insolvency risk.

"Despite a slow process of global sovereign risk convergence -- i.e. a
narrowing of the ratings gap between rich and poorer G20 countries --
BRIC countries are unlikely to replace the large Aaas' role as anchors
to the system any time soon," says Cailleteau.

A further theme identified by Moody's report is that the crisis has once
again revealed the dangers of financial globalisation for emerging
markets -- namely, the upside of the recurrence of asset price inflation
after the downside of precipitous outflows of capital. However, the
arsenal of policy levers has not expanded.

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