“The Baseline Scenario / The Next Global Problem: Portugal” Comment: The most overleveraged and overextended are always the first to go, be it the subprime borrower in the residential real estate market, the max loan to value property developer in commercial real estate or fiscally irresponsible sovereign nation. What Greece, Spain and other nations can teach the rest of the world is that fiscal austerity is a virtue and the sooner changes are implemented the better. For Greece and Portugal it was only a matter of time until the game was up. Multi year budget deficits of 10-15% of GDP are in the end unsustainable. Each country can hope that future growth will reverse the large annual deficits, but if that growth does not come quick enough then what was only a moderate problem can morph into a systemic issue of mammoth proportions. When a global slowdown as substantial and widespread as the past 18 months occurs, growth cannot come quickly enough and for all nations simultaneously. Everyone cannot grow exports at the same time. That is, not until we find some extraterrestrial “intelligent” life to ship goods off this planet.