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Top Economic Graphs of 2011

The BBC released a series of graphs from the top economists that highlight and summarize 2011 from a visual standpoint.  My personal favorite shows the interest rates of the European Monetary Unit (EMU) members:

Did things really change in 1999?

There are a few things that this graph really brings to my mind.  The first is that markets can be horribly long for an extended period of time.  Do I really believe that 2008 and the bankruptcy of Lehman created the disparity between the countries’ default probabilities?  Likewise, do I really believe that the countries became equal in credit risk when they merged into the EMU in 1999?

In addition, if there was an improvement in certain fiscal optics in 1996-1999 before the currency merger, were they actually real?  I think it is rather obvious that the countries with the worst fiscal issues “cooked the books” so that they could join the Eurozone currency pact and ride on the backs of the more fiscally disciplined brothers.  Do I feel sorry for Germany and France?  Absolutely not.  In fact, they did not abide by their own fiscal rules in 7 of the 11 years while in the Eurozone.

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2 Responses

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  1. VS says

    Hmm, interest rates seem to have declined before the Euro introduction. I’m not sure if they were declining in anticipation of the Euro. it would be interesting to know. Maybe, countries were temporarily working to meet the Euro constraints and that was a good thing. There seems to be quite a bit other than the obvious with this chart.

  2. SurlyTrader says

    “countries were temporarily working to meet the Euro constraints and that was a good thing”

    I think countries were working on *looking* like they met the Euro area constraints for joining. Not all, but certainly Greece…probably portugal, ireland and italy as well. Greece didn’t figure out that it was cooking its books in 2010, it just couldn’t cook the books anymore. In all situations, ponzi schemes have to come to an end and the market turmoil was the catalyst that brought it to light.

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