Sovereign debt bubble thread

[MadImmortalMan]

Well, Greece got an upgrade today.   

[The Minsky Moment]

Not sure why people would think that the ability of Iceland's government to borrow would be negatively impacted by losses to bank bondholders.  If anything it makes the government bonds look more secure.

[Admiral Yi]

I wanted to point out that this magnificent interest rate the Icelandic government managed to secure is one that Italy and Spain decided could only be a result of a plot by Jewish finance to ruin their countries.

[Iormlund]

Now compare the relationship between interest rates and growth. Iceland is paying a bit more in interest than it grows, so it can service debt pretty well. While we are experiencing a big gap between (negative) growth and rates.

[MadImmortalMan]

You mean growth of the tax revenue, or growth of the economy?

[Iormlund]

The economy.

Taking money from somewhere else to increase revenue doesn't make debt easier to repay.

[Iormlund]

Monti resigns after parliament passes his budget. Will he run in the coming elections?

[DGuller]

Speaking of Iceland, could this be one of those situations were the confusion between the level of the economy and the growth rate of the economy is fundamental?  Could Iceland be growing simply because it crashed so hard already, while other countries are contracting because they're still fighting for control, and have avoided the carnage so far?

[Sheilbh]

Monti resigns after parliament passes his budget. Will he run in the coming elections?

Doubt it. A potential 'Monti party' gets 4% in the polls, though people approve of him and many would want him as PM again. I think that might happen if there's a grand coalition situation.

Shame to see my favourite world leader go

Edit: DG, Ireland's not avoided the carnage. The total contraction's been about 20% of GNP. And that's in the best placed crisis country.

[Iormlund]

Speaking of Iceland, could this be one of those situations were the confusion between the level of the economy and the growth rate of the economy is fundamental?  Could Iceland be growing simply because it crashed so hard already, while other countries are contracting because they're still fighting for control, and have avoided the carnage so far?

Even if that were the case, in my not so humble opinion that's a much better strategy than stretching the crisis for a decade. What is going to happen with the millions of 30 year olds with virtually no job experience? What about demographic imbalances? While an ever increasing number of seniors retire birthrates are collapsing since young people lack job security.

[DGuller]

Speaking of Iceland, could this be one of those situations were the confusion between the level of the economy and the growth rate of the economy is fundamental?  Could Iceland be growing simply because it crashed so hard already, while other countries are contracting because they're still fighting for control, and have avoided the carnage so far?

Even if that were the case, in my not so humble opinion that's a much better strategy than stretching the crisis for a decade. What is going to happen with the millions of 30 year olds with virtually no job experience? What about demographic imbalances? While an ever increasing number of seniors retire birthrates are collapsing since young people lack job security.

The implication of your statement is that the journey is more important than the destination.  Taken to extreme, we should obliterate the economy at random times averaging about once in 20 years, to make sure that there is always potential for economic growth.

[Iormlund]

The journey creates the destination. For example if there's a widespread perception that things are going to be shitty, chances are they will be shitty because people won't spend, companies won't hire and so on.

[The Brain]

Maybe if the 30-year-olds didn't still live at home they'd land more jobs? Just a thought.

[Zanza]

Iceland's nominal GDP in USD is more than a third below its peak. That must be painful considering that Iceland doesn't make very many things and must import a lot of stuff. Not sure if that's the best policy in this crisis.

[Iormlund]

Such a correction was inevitable, since pre-crash GDP was a mirage. Shackling themselves to debts for decades to come, as the Irish did, seems far worse a choice than what they did.