Yes, the Greek crisis is threatening to sink the Euro Ship. The fact is that the debt levels of Greece have hit alarming levels because of which it is posing a threat of Euro currency. And these levels are around 120% of the GDP mark. Yes, that is high...but let's have a look at the same ratio for other developed countries...
* US Gross Debt 2008 12,867.5bn 90.8% of GDP (EST) (US Debt)
* Japan National Debt 192% of GDP 2009 est) 836,521 trillion yen 2007
* Italy National Debt 115% of GDP (FT)
* UK National Debt 68% of GDP (UK)
Source: Economics Help
The above numbers are as of Feb 2010.
How is Greece coping up with it?
It has reached out to its Euro zone partners and IMF to get sufficient loans. While IMF package is nearly ready for dispatch there are some clauses (as some have claimed) in Germany's constitution that disallow it to provide loans to Greece or any partner. This is significant because Gemany's share account for the largest share in the combined Euro zone's package,
I am keenly tracking the economic shifts. Let's see if the bail out package from Euro Zone gets constitutionally passed...
This story has also put some focus on Portugal and other European countries that have high debt levels.
I will track this story...
Sunday, April 25, 2010
Tuesday, April 20, 2010
Sunday, March 21, 2010
India improves its investment rating
S&P's revised India rating to drive investment: PMEAC
Global ratings major Standard & Poor's (S&P) has revised upward the ratings outlook for India to 'stable' from 'negative'. According to the Prime Minister's advisory panel the upward revision of the country's rating outlook to stable would foster investment inflows.
According to Prime Minster's Economic Advisory Council (PMEAC) Chairman, Dr C Rangarajan, the improvement in the outlook assigned by S&P will make the country a better investment destination.
He added that the improvement in S&P rating comes on the back of fiscal consolidation indicated in the budget, which will lead to substantial reduction in fiscal deficit for the next year.
The Planning Commission Deputy Chairman Mr Montek Singh Ahluwalia also commended the S&P ratings outlook.
Source: IBEF
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I am not a very big fan of ratings. These are based on a lot of data and quite often do not take into account softer aspects about a country's economic structure.
Here is a paradox- Obviously, ratings are based on data. Change is a rating reflects change in the base data right? A new rating becomes redundant if-
1. The data is not reflective of the actual potential of an economy
2. The data numbers are not readily updated or available. In other words, there is a lag in the generation of data points
3. Data numbers, although available, are not completely accurate as the input data points are inaccurate or not available in a short period of time
Given that data does not reflect true potential of an economy(this is true for any and every rating) and most of these data points are not completely accurate in the short term (yes, I can confidently say that this is true in case of India. Remember the sugar production number controversy?), how relevant these ratings are in the short term?
Global ratings major Standard & Poor's (S&P) has revised upward the ratings outlook for India to 'stable' from 'negative'. According to the Prime Minister's advisory panel the upward revision of the country's rating outlook to stable would foster investment inflows.
According to Prime Minster's Economic Advisory Council (PMEAC) Chairman, Dr C Rangarajan, the improvement in the outlook assigned by S&P will make the country a better investment destination.
He added that the improvement in S&P rating comes on the back of fiscal consolidation indicated in the budget, which will lead to substantial reduction in fiscal deficit for the next year.
The Planning Commission Deputy Chairman Mr Montek Singh Ahluwalia also commended the S&P ratings outlook.
Source: IBEF
___
I am not a very big fan of ratings. These are based on a lot of data and quite often do not take into account softer aspects about a country's economic structure.
Here is a paradox- Obviously, ratings are based on data. Change is a rating reflects change in the base data right? A new rating becomes redundant if-
1. The data is not reflective of the actual potential of an economy
2. The data numbers are not readily updated or available. In other words, there is a lag in the generation of data points
3. Data numbers, although available, are not completely accurate as the input data points are inaccurate or not available in a short period of time
Given that data does not reflect true potential of an economy(this is true for any and every rating) and most of these data points are not completely accurate in the short term (yes, I can confidently say that this is true in case of India. Remember the sugar production number controversy?), how relevant these ratings are in the short term?
Personal update
Hey guys...I know I have not been regular with my blog writing. Have not been keeping that well + had lots of stuff at work.
But I promise to improve on my irregularity :)
But I promise to improve on my irregularity :)
Monday, January 25, 2010
Increasing foreign reserves...
Foreign exchange reserves rose $899 million to touch $285.1 billion during the week ended January 15, largely on account of revaluation of
non-dollar assets in reserves.
The latest figures released by the Reserve Bank of India (RBI) on Friday indicate that the total foreign exchange reserves comprising foreign currency assets, gold and special drawing rights (SDR — reserves currency with the International Monetary Fund) rose $853 million reflecting valuation gains in non-dollar assets. The value of SDR and the reserve capital with the IMF rose $36 million and $10 million, respectively, during the week.
Economictimes
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Great news...right?
Now read this headline -
China Now Has Enough Cash Built Up To Buy 20% Of The S&P 500
Chinese foreign exchange reserves jumped 23.3% in 2009, hitting a mind-blowing $2.4 trillion notes 24/7 Wall St..
To put this into perspective, the S&P 500's total adjusted market cap is just $13.5 trillion according to the latest data sheet from Standard & Poor's. That means China's forex reserves could buy 18% of the S&P500.
Furthermore, if they were to keep growing at the current rate (even though they probably won't), within five years they could theoretically buy half of the S&P500. Now that could be some seriously massive fund flow, even if it isn't likely to happen or even possible.
Source:researchreloaded
non-dollar assets in reserves.
The latest figures released by the Reserve Bank of India (RBI) on Friday indicate that the total foreign exchange reserves comprising foreign currency assets, gold and special drawing rights (SDR — reserves currency with the International Monetary Fund) rose $853 million reflecting valuation gains in non-dollar assets. The value of SDR and the reserve capital with the IMF rose $36 million and $10 million, respectively, during the week.
Economictimes
__
Great news...right?
Now read this headline -
China Now Has Enough Cash Built Up To Buy 20% Of The S&P 500
Chinese foreign exchange reserves jumped 23.3% in 2009, hitting a mind-blowing $2.4 trillion notes 24/7 Wall St..
To put this into perspective, the S&P 500's total adjusted market cap is just $13.5 trillion according to the latest data sheet from Standard & Poor's. That means China's forex reserves could buy 18% of the S&P500.
Furthermore, if they were to keep growing at the current rate (even though they probably won't), within five years they could theoretically buy half of the S&P500. Now that could be some seriously massive fund flow, even if it isn't likely to happen or even possible.
Source:researchreloaded
Tuesday, January 19, 2010
Employment trends in India
Interesting article by Shankar Acharya (see below). Among a range of insights he also highlights the fact that the employment trends in India are difficult to capture due to unavailability of data- something I have time and again highlighted.
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India: Where are the jobs?
By Shankar Acharya
This piece is the first in an occasional series on the Indian economy.
What’s happening to employment in India? We know that every year there are nearly 13m new entrants into the nation’s labour force. Are they getting half-way decent employment opportunities? What proportion of the labour force is unemployed? How widespread is under-employment? What sort of job security do workers enjoy? What are the trends in real wages? The truth is we don’t know, at least not for any year after financial year 2004/5, the last year for which the National Sample Survey 61st Round gives reasonably good employment information.
Those inclined to paint a rosy picture point to the unprecedented, rapid growth of total employment at 2.9 per cent a year between 1999/2000 and 2004/5 (according to NSS data), which was far higher than the 1 per cent per annum growth recorded from 1993/4 to 1999/2000.
...more
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India: Where are the jobs?
By Shankar Acharya
This piece is the first in an occasional series on the Indian economy.
What’s happening to employment in India? We know that every year there are nearly 13m new entrants into the nation’s labour force. Are they getting half-way decent employment opportunities? What proportion of the labour force is unemployed? How widespread is under-employment? What sort of job security do workers enjoy? What are the trends in real wages? The truth is we don’t know, at least not for any year after financial year 2004/5, the last year for which the National Sample Survey 61st Round gives reasonably good employment information.
Those inclined to paint a rosy picture point to the unprecedented, rapid growth of total employment at 2.9 per cent a year between 1999/2000 and 2004/5 (according to NSS data), which was far higher than the 1 per cent per annum growth recorded from 1993/4 to 1999/2000.
...more
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