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The Eurozone - A Crisis of Confidence

Reading Bloomberg News' article by Lorenzo Totaro at lunchtime, Friday 28 October on Italy's latest Bond Sale falling short of expectations and the country's borrowing costs rising, I quickly checked to see what its current National Debt is. At €1,900.8 billion, amounting to €31,500 per inhabitant, this roughly measures 120 per cent of Italy's GDP.

The hibernating global bond bear is awakening

Central banks in the U.K., Europe, Australasia and Latin America, are focused on the ill effects of inflation, which is rising at a rate that threatens to impair economic growth in their respective jurisdictions. This follows a period where these economies were attempting to stoke growth through monetary stimuli that led to lower interest rates and sizeable gains in bond prices. This is now changing.

Inflate the Way Out

The IMF estimates the U.S. gross outstanding public debt to GDP ratio at approximately 100% for 2011. Not good, but the U.S. can point to Japan and Italy as having higher ratios. But probably not many think that Japan's dismal economic picture is one that the U.S. should try to model itself on. Italy also has more than its share of economic issues and an economic framework that not many countries aspire to.

A tale of two economies

A recent report on economic activity in Britain was stunningly anemic. It showed the U.K. economy actually contracted in the fourth quarter of 2010 by 0.5 percent. The troubling aspect was not just that it underwhelmed expectations, but that it comes at a time when inflation is rising to an uncomfortable level. Increasing prices have prompted discussions of a tightening in monetary policy by U.K. central bankers. Inflation rose to 3.7% in December, well above the official target of 2%, and s...

Inflation worries handcuff Central Bankers

With flagging economies and worries about austerity measures further crimping growth, about the last thing central bankers from the U.K. and Europe need to consider is combating inflation. But that is exactly what is being heaped upon decision-makers at the moment.