Brave New World

Daily Read 12/01/2010

Stocks drop, bonds rally as economic recovery seen sputtering (Bloomberg)

Greece condemned for falsifying data (FT)

Trade deficit in US increased more than forecast (Bloomberg)

Government Debt (FT- Lex)

The Lex story, published at the end of last week, deals with the threshold beyond which government debt becomes a problem for inflation and economic growth rate. According to Rogoff and Reinhart, there is little link between public debt and higher inflation in the developed world. The same applies to economic growth so long as debt stays below 90%. The bad news is that the UK and US are fast approaching that level.