As I am traveling in Europe for a few more days, it seems appropriate to review the very fascinating work of Arnuad Mares of Morgan Stanley in London. He poses the very provocative question: “Ask Not Whether Governments Will Default, but How?” and comes up with some very interesting statistics. He suggests that simply looking at debt to GDP misses the point and offers four other ways we should also evaluate sovereign debt risk. This is a very worthy contribution to Outside the Box.
The question I get over and over as I travel and present my thoughts is “When is the US going to get real about its fiscal deficits?” There is little sympathy for the massive deficits we are running. We are making Europe, or at least the part of Europe I am visiting, very nervous. Let us hope after the next elections we can say we are getting a handle on the deficits, and from both sides of the aisle and not just the Republicans. This is going to require cooperation.
Mallorca is very beautiful, but they have a very small and particularly nasty breed of wasp that has my left hand and fingers quite swollen and sore. But that did not take away from sitting on the balcony with my partners late one night watching a spectacular lightening display as a thunder storm was coming our direction. Then all of a sudden, we saw something that none of us have ever seen.
The moonlight was behind us, and shining through the clouds formed a very clear white rainbow. It was an amazing sight. I will never forget it. Not sure what it is a metaphor for, but I was glad to have witnessed it.
Your sometimes you just get lucky analyst,
John Mauldin, Editor
Outside the Box
Sovereign Subjects: Ask Not Whether Governments Will Default, But How
This is the first issue of Sovereign Subjects, a new Morgan Stanley publication focusing on sovereign risk in advanced economies. In this first installment, we take a broad perspective on government balance sheets and raise several themes to which we will return in more depth in subsequent issues. We encourage clients to provide us with feedback on this new publication.…