Q4 2012 Global Risk Analysis from BBVA

by Dr. Constantin Gurdgiev, TrueEconomics.Blogspot.in

Editor’s note: Global Economic Intersection welcomes Dr. Gurdgiev as a guest author. Constantin is an “embedded economist” in the Irish front lines, lecturing at Trinity College, Dublin. He brings us an insider’s view of what is going on in the world from an Irish point of view. Dr. Gurdgiev uses a relatively new analytical tool, heat maps, to show variation of parameters over time. These matrix analysis and display tools will be seen more and more on GEI pages from now on. They are becoming very useful in the analysis of time variation of economic parameters and for investment portfolio relationships. Analysis of the time variation of financial and economic data is a long overdue addition to the tool box of economic modelers and portfolio managers alike.

Few interesting risk mappings for December 2012 from BBVA Research:

Per BBVA, through Q4 2012:

“The Western Central Banks “Put” drives financial tensions back to normal in both US and European Markets. But some segments still “under pressure” (banks and interest rates). Emerging Markets among the most benefited markets during the quarter. The Central Banks actions leads EM Europe below the neutral area thanks to the diminishing Euro convertibility risk. Asian and to a lesser extent Latam financial pressure enter also in the very low tension area.”

My view – don’t be complacent on Latin America and some Asian markets – keep an eye out for Grey Swans (see my note here).

A nice chart showing easing of pressures in the sovereign CDS markets:

Nice performance for the Peripherals, but… caveat emptor – CDS markets might be singing a song of no content (see here).

Ratings agencies moves summary:

Note that Ireland is the longest running stressed ratings sovereign other than Hungary (shallower downgrades, albeit to below junk ratings). Which puts into perspective the irish Government claims to the success of Irish programme. In reality, we’ve been down for longer than anyone else, so everything else held equal, we should be expected to come of it earlier too. So far, however, there have been no upgrades (that’s right, despite Irish Government claims – example here):

Here’s an interesting risk radar map:

And same for Spain and Italy:

and for Greece, Portugal and Ireland:


Above I reproduced some interesting risk maps from BBVA Research report for Q4 2012. Here some more of the same:

And debt levels against risk thresholds (do keep an eye for Ireland’s ‘unique’ position):

I am including the above primarily to re-enforce the fact that the issue of total economic debt I am continuing to raise in relation to Ireland and the rest of advanced economies is now becoming mainstream.

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2 replies on “Q4 2012 Global Risk Analysis from BBVA”

  1. Nice, thanks. Unfortunately Australia doesn’t get a run in many of your charts.
    One thing,. I would add stance of budgetary policy into the risk map. Is total government spending expected to be expanding or contracting and to what degree? Government austerity has been argued even by senior IMF economists to be causing problems in the periphery as a result of a negative multiplier. The Austerians have been consistently wrong about austerity producing growth, just as the inflationistas have been wrong about QE producing inflation (at least while there is substantial underutilised capacity including labour).

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