Eco+Nomics

So, Mario Draghi said that an inflation much lower than 2% is against his mandate. And it is! If you ask me, early 2015 is the right time, if not too late, to buy sovereign bonds. Let me, please, tell you what I think. First of all, given that Eurozone economy is below its potential, inflation risk will remain low, and the zero lower bound will prevent monetary policy to be "hazardously" inflationary. But, this is an argument why we should not fear of inflation, if the ECB decides to take bold action. True! For now... Moreover, given that we remain below our potential output, member states have begun to deviate from austerity and call for more expansionary budgets. Sooner or later, they will start creating budget deficits as a mean of expansion. And this has two implications. The first one, which relates to my previous argument is that budget deficits will boost expansion, and, hence, the return to the potential output. Therefore, the later the ECB decides to act, the mo...

We reed at Reuters that  "Greek stocks plummet as bond yield surge threatens bailout exit" ! The over optimism of the Greek government turned out to be a huge bomb they have been playing with for a very long time. Perhaps, in an attempt to shape expectations, or to tame the animal spirits...  Anyway, as I wrote a few months earlier the borrowing cost was,  is and will remain   prohibitive  for a very long time. Until we raise adequate budget surpluses to finance our debt obligations, including annual interest payments, we cannot cut all ties with the IMF. Why particularly the IMF? Because, our Euro partners will find it hard to convince their tax payers to fund us even more, and the markets know that.  Added to the enormous borrowing cost, considerable political unrest is about to unveil. Naturally, after almost five years of continuous social turmoil - increasing unemployment, poverty, social exclusion, income losses - it would be naive to expect...