How hard it is to run a government! So many competing balls to juggle. And I’m only talking about economics. The economic difficulties in Europe are causing tentative money to move to the US and safer haven vehicles. And for today, rates are probably stable-to-down.
And currently, discussion is beginning as to the total dissolution of the Euro (and EU community.) Former Federal Reserve Chairman Paul Volcker, 82, said yesterday in London, “You have the great problem of a potential disintegration of the euro. The essential element of discipline in economic policy and in fiscal policy that was hoped for” has “so far not been rewarded in some countries.”
But this discussion is as to the challenges; as this portends our own future — and the future of every other nation on earth: When the Euro was formed, Italy, at 10.2% debt-to-GDP, was significantly above the 3% limit — and therefore outside of admission criteria. However, the then Italian leader, Romano Prodi, negotiated with Germany that Italy would buy their milk, if admitted. In the end, all economies prosper by their activity; and such was appealing to German to “bend the rules” (concerning the limit violation.)
And activity is a good thing. But spending needs to be controlled, as a high debt-to-GDP weighs everything down — as Europe is now feeling the pinch of this reality, as multiple of the EU nations struggle with their debt.
And worse—and the point of this post—is now that these various countries are instituting austerity measures to bring their debt into line, all of that slows down the economic growth. And it’s partly this that’s causing today’s “flight to US bonds/notes.” Not only the fact that some believe that the EU assistance measures might not be enough; but the reality that the measures might actually be enough — thus causing the slowing of European growth, as the nations reign in their debt.
How hard it is to run a government.
Yet, productivity we must strive for; but equally as important (if not more so) is that debt must be managed prudently. Do we stop spending entirely? No; but on the other hand, neither do we squander.
Technically, a move above 3.63% will signal a move toward 3.75%; and a move closing below 3.43% will signal a trend toward 3.33%. And as of this writing, we’re at 3.46%
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