More on why Italy is not yet a threat to the economy or markets

This post was originally published on Patreon on 30 May 2018

Yesterday I said that I believed the Italian meltdown presented a buying opportunity because it was not existential. And today, calm has returned, actually sooner than I had expected. The Italian government bond auctions have gone well. The flight to safety has reversed much of its move. And stocks are rising again.

So I want to say more about the model I use to think about the economy and financial markets - and what we are seeing right now.

It's pretty simple, really. Basic econometrics do a very good job of telling us where an economy is headed over the medium-term because economic modeling is sophisticated enough to feed macro data in and spit out and range of likely outcomes. And if an economy is humming along at 2-3% ann...


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