Skip to comments.How to Tell a Nation Is at Risk (of Default)
Posted on 07/16/2010 7:18:12 AM PDT by SeekAndFind
Which governments will not be able to pay their bills?
The ones with private sectors that are not doing well enough to bail out the government.
That should be one lesson of the near default this year of the Greek government. Government finances are important, but in the end it is the private sector that matters most.
If so, those who focus on fiscal policy may be missing important things. Spain appeared to be in fine shape, with government surpluses, before the recession hit. Now Spain is being downgraded and has soaring deficits.
Academics and market practitioners have not had an impressive record of predicting serious financial downturns or of providing adequate early warnings of impending sovereign economic and financial problems, says Edward Altman, a professor at New York University who has long studied debt defaults by companies and governments.
Mr. Altmans answer is fairly simple: One can learn a great deal about sovereign risk by analyzing the health and aggregate default risk of a nations private corporate sector, a type of bottom-up analysis.
After that analysis, using a system he developed with a company called Risk Metrics, Mr. Altmans ranking of European governments now differs a little from conventional wisdom. He sees Britain and the Netherlands as the safest governments, ahead of Germany. Greece is at the bottom, of course, with Italy, Portugal and Spain looking better than it does, but not particularly good.
Looking at corporate strength, he argues, does a better job of forecasting debt problems than do traditional macroeconomic indicators, like gross domestic product growth and debt levels relative to G.D.P.
That analysis is sharply at odds with much current political discourse, which focuses on debt-to-G.D.P. levels and purports to see disaster looming for both Britain and the United States if something is not done immediately
(Excerpt) Read more at nytimes.com ...
I suggest we do not raise the debt limit ...
As long as Obambi is still a resident of the White House!
This really concerns the lamearse, idiot-ridden libtard New York Times how exactly? =.=
“The ones with private sectors that are not doing well enough to bail out the government. “
His analysis makes sense, but he may not be projecting the impact of all the negative legislation and regulation of american industry. The outlook for business in the US is worse and that will impact on the fiscal issue.
Just talk to the people you come in contact with about how their private business is doing..you won’t get much positive response, but guarded responses.
Federal debt, as reported, has skyrocketed during the Obama administration. But a large part of that stems from decisions made years before most Americans knew who Barack Obama was, and certainly before he had any power. Those decisions were made by banks and brokers. They were made by Fannie Mae and Freddie Mac when they were not under direct government control.
The American economy currently is doing better than it would sound from the rhetoric on both sides of the political spectrum. The two demonstrable signs that the recovery has slowed are in areas housing and cars where temporary stimulus programs were artificially spurring growth. It was obvious that there would be brief declines when those programs expired.
In Washington, nobody seems to want to see good news. When government employment rose because of Census hiring, that was dismissed as obviously temporary. Now that the Census Bureau is letting people go, that is seen as bad economic news.
The important goal now is a healthy economy, and there are signs that it is arriving. Corporate profits were surprisingly strong in early 2010, and early second-quarter reports are encouraging.
lulz, claiming “there are signs” that a “healthy economy” is arriving was shot down yesterday with the passage of the Dodd-Frank Financial bill and if that is not enough for ya, wait till the Bush tax cuts end in Janaury....yeah, we well on our way to a “healthy economy”....
Does put down the crack pipe mean anything? =.=
What are we doing in this handbasket and where are we going?
You missed the point. The NYT article was intended to support Obama and his policies. It had nothing to do with concern over the debt and the deficit.
Translation: Government will be able to tax the wazoo out of companies to continue funding deficit spending. After all, if they're just going to sit on their profits, why shouldn't the government come along and put that $$ to good use?