The Euro Crisis: 2012 key driver on US economy

MADRID | By Miguel Navascués |

This is the most important chart of the year 2012, according to the Business Insider. It shows that the main problem has been the euro turbulence. If you take a look at the grey line, it is an indicator of financing conditions, whereas the blue one points out to a synthetic index of risk of the euro.

Although indicators are different, you may see the figure have nothing to do with those I usually raise (chart below) as a measure of risk in the U.S., and its dependence of what happens in the euro.

The chart below is the differential between the performance of the BAA bond and that of the Treasury bond. When the perception of risk increases, the performance of the BAA goes up and the Treasury bond goes down. The indicator, therefore, rises when the risk does: private investment becomes more expensive.

On the contrary, when there is more market confidence, the safe of the Treasury bond investment is abandoned, and private investors want more risk. Their yields converge, and that brings down the indicator.

The precipitous euro fall is due to Mario Draghi’s announcement, which has already cooled, differential has been reexpanded. Now the small ups and downs are due to the fiscal cliff and Mr Bernanke’s last operation, which apparently has not been decisive. By the way, I read that hopes of an agreement to avoid the cliff are gone, something normal if we take the Republican/Taliban position into account.