Throwing BRICs at PIIGS

Do not be alarmed by the title.  I do not mean to advocate any form of animal cruelty.  Please don’t report me to PETA.  I mean no harm.  Don’t inform the SPCA; they have better things to do with their time.  The world is full of acronyms and I am merely employing two which have been bandied about over the past couple of years or so to make a point.  Allow me to explain.

PIIGS is an abbreviation for Portugal, Ireland, Italy, Greece and Spain.  They have been singled out as a representative group of European countries abetting the economic ruckus centered within the European Economic Community, although they are by no means the only weak links in that chain.  Many economists feel the entire continent may be on the verge of a recession which could spread across the world.

Enter the BRICs: Brazil, Russia, India and China.  These four countries are seen as representing the power of emerging markets.  The combination of their population’s size and age combine with an improving living standard to provide the (old) developed world with vigorous consumers able to thwart this specter of recession and carry the planet into a brighter, more prosperous future.  In theory.

Here’s another theory for you.  Publically traded companies listed on exchanges within their respective countries can be combined into an index which reflects to some degree the health of each nation’s economy.  For instance, while no one can actually buy an index per se, we can look to the Dow Jones Industrials to get a feel for the general economic health of the U.S.  When applying this reasoning to Europe we should not be surprised to see the Athens exchange or Borsa Itaniana hovering at their lows for the year.  What may surprise you is a quick look at the Bovespa of Brazil, Russia’s MICEX, India’s SENSEX or China’s Hang Seng.  What are they doing so close to their annual lows as well?

The names have changed over the decades but old saying, often repeated, goes “When country A sneezes, Country B catches a cold.”  This new global economy is complicating such attribution.  Instead, it is coming to resemble a kindergarten where every cough and sniffle gets passed around, infecting everyone.