Slow Growth And Ratings


SEPTEMBER 2011 | VOL.25 NO. 8


Once again the month of August has brought turbulence to the financial markets. It has shown once more the correlation between different stock markets, reflecting the growing interdependence of economiesan interdependence built on huge trade flows and the vagaries of supply and demand, particularly between continents.

That correlation is why uncertainty around the economic prospects of European countries like Italy and Spain affects Wall Street, and why the mention of a risk of recession and double dip in one country creates teeth grinding in most other markets.

The historic and controversial downgrade of the US sovereign rating from AAA to AA+ by Standard & Poors and the renewed tensions in the Euro area have generated discussions worldwide about the role of public debt and reserve currenciesnot to mention a renewed debate on the reputations and roles of rating agencies.

At the same time, many emerging economies realize how much of their growth depends on consumers in industrialized nations, and have gone as far as to openly criticize the economic policy of these countries.

All of these debates and developments seems to have been metaphorically uploaded to a giant screen and broadcast wordwide. Center stage: the US debt ceiling debate and the unprecedented announcement by the US Federal Reserve of exceptionally low levels for Federal Funds rates at least through mid-2013. Low rates, in other words, were pre-announced for the next two years. The result was historically-low returns on two-year Treasury bonds, making stock dividends and longer duration bonds more attractive.


Global Finance

we are ever more convinced that turbulence and uncertainty increase the need for clear analysis of the global economy and the impact of regulatory reform.

In this issues cover story we look at how companies are preparing for Basell III regulations that have yet to even be approved, the controversies that have already arisen, and how regional variations in implementation are being played out.

Andrea Fiano