ATA Trucking Index decreases slightly in April
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DINO GRANDONI JUL 18, 2011
The opening question to most undergraduate macroeconomics courses usually is, "Why are some countries rich and others poor?" The lecturer will then probably dive into all of the usual suspects behind economic growth--natural resources, technological innovation, savings rate--without mention of perhaps the most primal of measurements: penis size.
That's right, penis size. In a study published today, the University of Helsinki's Tatu Westling points out a surprising strong correlation between a country's GDP growth rate and average penile length. As the chart above shows, countries that averaged smaller penis sizes grew at a faster rate than their larger counterparts between 1960 and 1985. Every centimeter increase in penis size accounted for a 5 to 7 percent reduction in economic growth. The study also showed that overall GDP was at its highest in countries with average-sized penises with GDP falling at the extremes of penis length.
As Westling explains in his paper, previous studies "concentrate on economic, social and political factors, these and many related treatments largely abstain from biological and/or sexual considerations. The aim of this paper is to fi ll this scholarly gap with the male organ." Interesting choice of words (the study is full of them, as you'll see below), but why should this particular, um, unit have any explanatory power? Penis size and economic growth might be related through some intermediary variable like gender equality, political stability, or population growth, Westling writes, but he seems to prefer an admittedly more Freudian explanation that goes like this: Penile length and income are both factors that contribute to an individual's level of self-esteem, and if a person has more of the former, he'll need less of the latter. Or, to put it in layman's terms, some fast-growing countries may be compensating for something. Not a particularly poor argument until you realize, as Westling acknowledges, that half the world's population don't have penises.
As Westling told the GlobalPost, he was only half-serious about the study until he saw such a strong statistical correlation. "But seriousness," he says, "does not imply that I believe in causality at this point." That seriousness doesn't always quite come through given the way some things are worded in the study. Here are some choice quotes; sometimes it's not entirely clear if the double entendres are intentional.
Taken at face value the findings suggest that the `male organ hypothesis' put forward here is quite penetrating an argument. Yet for the best of author's knowledge, male organ has not been touched in the growth literature before.
...the `small male organ' countries would gain more utility by expanding their economy than the `large male organ' countries. Actually the latter populations would simply exploit their nature-given, non-disposable groin-area endowments.
It clearly seems that the `private sector' deserves more credit for economic development than is typically acknowledged.
"Nothing would destroy the motivation for solid budgetary policies faster than joint liability for (EZ) state debts" [emphasis added]
At the left-hand side of the chart we see that global issuance of triple-A bonds was more or less nonexistent back in the early '90s. All those Treasury bonds, all those agency securities from Fannie (FNMA.OB) and Freddie (FMCC.OB), all that Japanese debt — add it all up, and it still comes to essentially zero by the standards of what seems normal today. Check out the left-hand y-axis: it goes up in $1 trillion increments. And we’re not talking stock, here, we’re talking flows: this chart is issuance per year.
(It’s pretty easy to see, looking at this chart, how a company like Pimco can find itself with over $1 trillion in assets under management: that’s now just a small fraction of the bonds issued each year.)
Now zoom back, and look at the chart as a whole: it’s going up and to the right, which says two things. Firstly, the amount of debt in the world is soaring. That’s a bad thing, because debt is much more systemically dangerous than equity. And secondly, the amount of triple-A debt in the world is soaring as well. Which is a worse thing, because triple-A debt is much more systemically dangerous than most other debt.
Then look at the green line. Triple-A debt wasn’t a huge part of the bond market back in the early 90s, but for the past decade it has invariably accounted for somewhere between 50% and 60% of total global fixed income issuance. That’s possibly the most horrifying bit of all: it simply defies credulity for anybody to be asked to believe that more than half the bonds issued in any given year are essentially free of any credit risk.
Finally, look at the way that the maroon bars — structured products, basically — have given way to a scarily large purple bar at the far right of the chart. That’s sovereign debt, and it tells you all you need to know about where the next crisis is likely to come from.
In a nutshell, triple-A debt is dangerous; there’s far too much of it; its growth seems out of control; and the triple-A problem has now become a sovereign-debt problem, in a world where sovereign-debt crises are the most damaging crises of all.
All that said, there are two things worth bearing in mind which make the chart slightly less horrific. The first is that for reasons I don’t understand, the chart ends in 2009, a crisis year when sovereigns pulled out all the stops in their attempt to prevent a global Depression. We’re more than halfway into 2011 at this point, there’s no good reason why the chart couldn’t include 2010 as well. And that might show 2009 as being a bit of an aberration. Does anybody have the numbers for total triple-A bond issuance in 2010, and how much of that was sovereign?
United States of America ‘AAA/A-1+’ Ratings
Placed On CreditWatch Negative On Rising
Risk Of Policy Stalemate
Standard & Poor’s has placed its ‘AAA’ long-term and ‘A-1+’ short-term sovereign credit ratings on the United States of America on CreditWatch with negative implications.
Standard & Poor’s uses CreditWatch to indicate a substantial likelihood of it taking a rating action within the next 90 days, or in response to events presenting significant uncertainty to the creditworthiness of an issuer. Today’s CreditWatch placement signals our view that, owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the U.S. within the next 90 days. We have also placed our short-term rating on the U.S. on CreditWatch negative, reflecting our view that the current situation presents such significant uncertainty to the U.S. creditworthiness.
Since we revised the outlook on our ‘AAA’ long-term rating to negative from stable on April 18, 2011, the political debate about the U.S.’ fiscal stance and the related issue of the U.S. government debt ceiling has, in our view, only become more entangled. Despite months of negotiations, the two sides remain at odds on fundamental fiscal policy issues. Consequently, we believe there is an increasing risk of a substantial policy stalemate enduring beyond any near-term agreement to raise the debt ceiling.
As a consequence, we now believe that we could lower our ratings on the U.S. within three months.
We may lower the long-term rating on the U.S. by one or more notches into the ‘AA’ category in the next three months, if we conclude that Congress and the Administration have not achieved a credible solution to the rising U.S. government debt burden and are not likely to achieve one in the foreseeable future.
We still believe that the risk of a payment default on U.S. government debt obligations as a result of not raising the debt ceiling is small, though increasing. However, any default on scheduled debt service payments on the U.S.’ market debt, however brief, could lead us to revise the long-term and short-term ratings on the U.S. to ‘SD.’ Under our rating definitions, ‘SD,’ or selective default, refers to a situation where an issuer, the federal government in this case, has defaulted on some of its debt obligations, while remaining current on its other debt obligations.
We may also lower the long-term rating and affirm the short-term rating if we conclude that future adjustments to the debt ceiling are likely to be the subject of political maneuvering to the extent that questions persist about Congress’ and the Administration’s willingness and ability to timely honor the U.S.’ scheduled debt obligations.
So what’s the takeaway? Basically investors front-ran the inclusion of Greece into the eurozone. The trade worked. A lot of people made a lot of money as the spreads came in to Germany as expected. And on the face of it, some of the statistics such as Greek inflation numbers seemed to back up the story that the Greek economic/technocratic establishment was starting to behave in a way that would be more favorable to bond investors. (Although, as we know now, it would have been a good idea to view those stats with some skepticism.)
But in giving a quick glance to the coverage of the great convergence, it’s tough to find any indication that anybody really understood what what “convergence” really was and how it explained bond yields that low. In short, it was a trade that worked, until recently, when it stopped working.
(Reuters) - The existing European rescue fund now in place is not large enough to protect Italy as it was never designed to do that, an unnamed European Central Bank source was quoted telling Die Welt newspaper on Sunday.
"The existing rescue fund in Europe is not sufficient to provide a credible defensive wall for Italy," the central bank source was quoted telling the newspaper in an advance text of an article to appear on Monday.
"It was never designed for that," the source added.
The newspaper said that the rescue fund might have to be doubled to up to 1.5 trillion euros. But it was not clear if it was the central bank source calling for the increase.
There was a sharp sell-off in Italian assets on Friday, which has increased fears that Italy, with the highest sovereign debt ratio relative to its economy in the euro zone after Greece, could be next to suffer in the crisis.
On Friday, yields on Italian government debt – the largest bond market in Europe – hit their highest levels since October 2002. Italy is now borrowing at its biggest premium over German bunds, the benchmark for the region.
The move followed the surfacing last week of tensions between Silvio Berlusconi, prime minister, and Giulio Tremonti, Italy’s finance minister, over the country’s proposed austerity programme.