I misread.

When Financial Markets Misread Politics

Last, but not least, the eurozone authorities misread the confidence factor. In theory, simultaneous fiscal consolidation and supply side reform facilitates economic recovery, because it increases confidence among consumers and investors, thereby inducing higher spending and production.

First, the eurozone authorities misread the real causes of the debt crisis, which stemmed mainly from a growing competitiveness gap between the core and periphery countries. The resulting private sector imbalances culminated in banking problems that were eventually transferred to sovereigns.

European fixed income markets rallied strongly as a result, only to reverse course days later when Trichet and his colleagues made it clear that the markets had misread him. So there was unwelcome and unneeded market volatility because Trichet couldn t get the message out straight.

But, having deftly out maneuvered his opponents for three years, Zardari seems to have misread the current political environment, for Pakistan is not the same country in which his wife and father in law wielded power. By trying to play by the old rules, he committed several mistakes that may ultimately cost him his job and the Bhutto family its hold on power.

After the 2008 financial crisis, many Chinese expressed the mistaken belief that the US was in terminal decline, and that China should be more assertive particularly in pursuing its maritime claims in the South China Sea at the expense of America s allies and friends. During Obama s first year in office, his administration placed a high priority on cooperation with China, but Chinese leaders seemed to misread US policy as a sign of weakness.