Interpreting economic numbers

I’m afraid a bond yield of 2.3% on 10 year UK government debt isn’t the market saying ‘well done you, nice deficit reduction plan you’ve got there mate’ it’s the market screaming ‘for Christ’s sake, everything is fucked and we’re terrified about vanishing growth’.

Well, yes, but bond yields of 15% and rising (Greece maybe?) or 6% (Italy, Spain) or just rising bond yields (France) are also indicators that:

it’s the market screaming ‘for Christ’s sake, everything is fucked

So, which set of problems would you prefer to have?

7 thoughts on “Interpreting economic numbers”

  1. Hmmm this is clearly an issue for the guys over at TUC to solve, with there understanding of the greater good they will be able to ignore reality and save the day in no time;)

  2. I’m pretty much proceeding on the assumption that everything is fucked at this point. It’s enough that I go to the ATM a few days after payday and see that my wire transfer’s cleared into my account. Anything beyond that is gravy.

    Day-to-day, I’m a relatively optimistic guy. Long-term, I find the analysis everything is fucked to be quite cogent. Actually, I’m a strong-form adherent: everything is so irremediably fucked beyond the bounds of sanity that putting one’s head between one’s legs and kissing one’s ass goodbye will at some point be the only prudent course of action.

  3. I’m pretty baffled as to how the analysis that would apply for US Treas. and the Bund would apply for gilts. Basically, investors in gilts, I think, would give considerably less of a fuck about UK growth than Treas. investors give about US growth or Bund investors give about German growth. The UK is just too much of an open economy for that kind of thing to matter.

    (Anyone got stats on the proportion of gilts held by foreigns vs. domestics? One of the problems with analyzing Japanese debt was that a huge chunk of it was held by the Japanese domestics, who just didn’t react to yield changes at all.)

  4. (i.e. I am making the assumption, Tim correct me if I’m wrong, that investors in UK gilts don’t substitute between gilts and UK stocks, but between UK gilts and other sovereign debt.

    (The Mishkin equation says that domestic interest rates = foreign interest rates – [(expected ex. rate – ex. rate)/(ex. rate)], and the expected domestic interest rates feed into the expected ex. rates somehow, but honestly I just don’t see how the thing works in this context.)

    Obviously I might be waaaaayyyyy wrong here.)

  5. my sources tell me that hedge funds and other institutions are simply going out of equities and PIGS debt into gilts. But whatever, Dunc’s analysis is more than usually bone-headed. Is he the illegitimate son of Peston?

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