giovedì 17 novembre 2011

Pubblica disinformazione sull'economia

Sono un po 'confuso (o forse non sono io!) su ciò che il TG1 (la più importante emittente pubblica italiana) ha riferito oggi. Infatti, il corrispondente dalla Borsa di Parigi ha affermato che ( link qui in italiano , vedi min.17.00) "lo spread tra l'Oat 10 anni e Bund ha raggiunto un picco di 200 punti base, in tal modo la Francia prende in prestito a tassi di interesse doppi rispetto alla Germania ". Secondo il corrispondente, lo spread è un moltiplicatore piuttosto che una differenza sui tassi di interesse! In questo modo, se il rendimento Bund è 1,5%, il rendimento dell'Oat dovrebbe essere del 3%.
Mentre sto scrivendo, il rendimento del Bund è 1,82% e lo spread con l'Oat è di 190 bp ( fonte: Financial Times ). Di conseguenza, il rendimento dell'Oat è 1,82% +1,9% = 3,72%. Secondo il giornalista, il rendimento dell'Oat dovrebbe essere 1,82% * 1,9% = 3,46%. Per rendere le cose più semplici, supponiamo che lo spread è 200bp (o 2,0%), come riportato dal giornalista. Se il Bund rende il 1,8% il rendimento dell'Oat è 1,80% +2,0% = 3,80% che è più del doppio. Al contrario, secondo il corrispondente l'Oat dovrebbe rendere 1.80%*2.0%=3.60%! L'unico modo per il giornalista di avere ragione, è lo scenario in cui il rendimento del Bund 2,0% in modo che l'Oat renda il 4,0%.
In conclusione, mi aspetto il TG1 di fornire notizie in modo corretto per evitare di confondere il pubblico!

mercoledì 16 novembre 2011

Public Disinformation Service about Economics

I'm a bit confused (or  maybe It's not me!) about what the TG1 (the most important italian public broadcaster) reported today. Indeed, the correspondent from the Paris stock exchange claimed that (link here in italian, see min.17.00) "the spread between the 10 years Oat and Bund peaked at 200 basis points, thus France borrows at two-fold higher interest rates than Germany". According to the correspondent, the spread is a multiplier rather than a difference on interest rates! In this way, if the Bund yield is 1.5% then the Oat yield should be 3%.
While I'm writing, the Bund yields 1.82% and the spread to the Oat is 190 bp (source: Financial Times). As a result, the Oat yields 1.82%+1.9%=3.72%. According to the journalist, the OAT yield should be 1.82%*1.9%=3.46%. In order to make things simpler, let's assume that the spread is 200bp (or 2.0%) as reported by the journalist. If the Bund yields 1.8% the Oat yields 1.80%+2.0%=3.80% that is more than two-fold. Conversely, according to the correspondent the Oat should yield 1.80%*2.0%=3.60%! The only way for the journalist to be right, is the scenario in which the Bund yields 2.0% so that the Oat yields 4.0%.
In conclusion, I really expect the TG1 to provide news properly in order to avoid to confuse the audience!

sabato 12 novembre 2011

Quick note on Italian stagnation

This chart published by The Economist in an article about Italy's economy (source: IMF World Economic Outlook) supports what I wrote in this post. GDP per person actually declined in Italy between 2001 and 2011. As a result, the lack of growth is the main issue of Italy triggering fiscal troubles and debt woes. Thus, Italy needs reforms and a fiscal policy able to boost the economy. I see Mario Monti as the first step on this virtuous path.

martedì 8 novembre 2011

Italians, let's buy BTPs!!! (Foolish)

The debate about our national debt crisis is evolving on an everworrying path. Giuliano Melani, an enterpreneur, launched an appeal to all italians to buy government bonds. Paolo Manasse, Professor of Economics at University of Bologna, demonstrates the foolishness of such appeal on his blog. Further, Mr. Melani reinforced his thesis this morning claiming that TAX EVADERS should purchase BTPs.....WHAAAAAAAT? I'm really astonished! Is this the proper solution to the high debt burden? Meanwhile, yields on italian bonds are soaring , the BTP-Bund spread is widening...

sabato 5 novembre 2011

Do you believe in economic fairy tales???

For years, the italian Finance Minister Giulio Tremonti and the italian Government told us an awesome tale about our public finances. The chart below, published by Bloomberg clearly supports who argue that the reality differs widely from the tale.
As Paolo Manasse, professor of Economics at University of Bologna, reportes on his blog (I strongly recommend it), the public debt remarkably increased under Berlusconi Governments. In addition, according to prof. Manasse  the debt surge is due to both the recession and the Government's choices (ie. increasing public spending and scrapping the property tax).

So, a big question comes to my mind and is puzzling me: why did the Government claims that Italy is a strong economy, with a high private wealth and stable public finances? Indeed, investors don't believe in this tale anymore and yields on italian bonds skyrocketed, worsening the public finances leading to a vicious cycle. The lack of credibility of the Government contributed to trigger the rise in the yields, forcing the ECB to implement the Security Market Program and purchase italian bonds. Still yeasterday, during the conference at the G20 in Cannes, Berlusconi and Tremonti kept on claiming that in Italy there are no signs of economic crisis since restaurants, trains and resorts are full!
This is utterly misleading and do you still believe in economic tales?

Well done Mario!!!

Last Thursday Mario Draghi in his debut as President of the ECB took an unpredictable decision by cutting the main refinancing operations interest rate by 1/4 to 1.25%. Draghi demostrated great courage even though it was a unanimous decision. Obviously, such a small rate cut is unlikely to restore confidence and boost growth in the euro area, albeit it is crucial to ease the credit market and the sovereign bond market too, expecially in an environment of slowing inflation and stable inflation expectations. Furthermore, the ECB continued to purchase (though not so effectively) Italian and Spanish bonds on the secondary market.
To sum up, despite his nationality and against all the odds of being "more German than Germans" Draghi acted decisevely to a more accomodative monetary policy.

domenica 25 settembre 2011

Wages inflation, productivity and unit labour costs

Interesting post form The Economist about the percentage change in Q2 2011 of wages, labour productivity and unit labour costs on the second quarter of 2010 in OECD countries. Broadly speaking, labour productivity grew at a slow pace whereas wages increased. As a result, unit labours costs rose about 2-3% over the last year.
Conversely, two groups of countries show different patterns. Norway and Australia faced a decline in labour productivity and a rise in wage that led to soaring unit labour costs. On the other hand, in Denmark, Netherlands and Austria productivity grew more than wages, thus unit labour costs fell about 1%.
Next, I would like to focus on Italy. Labour productivity growth turned out to be steady so the rise in unit labour costs entirely reflects the wages inflation. This is the main issue in the last decades in Italy. Indeed, tha lack of productivity growth triggers a fall in competitiveness, that is negative expecially for a country that fundamentally relies on exports. To sum up, this chart shows how Italy should do everything to improve its competitiveness and restore economic growth in order to reverse this harmful path.