European tremors

Stratfor reports on Latvia’s failed bond auction:

On June 3, the Latvian government failed to auction any of its 50 million lati ($100.7 million) of bonds, managing to sell only about 2.75 million lati ($5.5 million) worth of 30-day bonds the following day, which is raising fears that European emerging markets will have to struggle to raise capital for their rising debt…. The Latvian economy is, to put it bluntly, in shambles. Gross domestic product (GDP) is forecast to decline by over 13 percent in 2009.

The conventional wisdom has it that Europe is belatedly being hit by the financial turmoil that struck the States last fall and that the USA has seen the worst. I suspect that what we’re seeing is more akin to water sloshing back and forth in an increasingly turbulent manner, in which case the relative calm in American markets is only temporary. And by “over 13 percent”, Stratfor actually means 18 percent.