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Bond market vigilantes turn on Italy
The Telegraph ^ | 11/12/2011 | Tom Stevenson

Posted on 11/13/2011 12:13:23 AM PST by bruinbirdman

I remember a former editor of this newspaper instructing the City desk in 2006 to get up to speed on collateralised debt obligations (CDOs).

Most of the people in the room at the time had not even heard of these. Even less did they have any idea what they were or how toxic they would turn out to be.

We soon found out, however, as the unfolding financial crisis forced us to get to grips with the language of derivatives.

Today, it's bonds you need to understand. The global bond market is worth $100 trillion (£62 trillion). That's around twice the size of the world's equity markets and a number so large it is scarcely comprehensible.

Last week, the bond market's so-called vigilantes turned their fire on Italy and, as with Greece before it, they quickly drove the cost of borrowing for its government to unsustainable levels. Yet again, the bond market forced politicians to think the unthinkable, casually stepping over every line they attempted to draw in the sand.

I think the markets are about to step over another critical line, forcing a rethink of the idea that the European Central Bank (ECB) is not the eurozone's lender of last resort. Until last week, it could plausibly pretend it was not, but the storm has blown across the Ionian Sea to a country that is peripheral only in terms of its geography.

That has changed everything. Accounting for more than a sixth of European GDP and fully a quarter of the eurozone's outstanding government bonds, Italy is beyond the reach of any institution with less than the ECB's unlimited firepower in the sovereign bond market.

It is widely held that there are only two possibilities for Europe now. Either Germany gets over its historically understandable fear

(Excerpt) Read more at telegraph.co.uk ...


TOPICS: Business/Economy; Crime/Corruption; Government; News/Current Events
KEYWORDS:

1 posted on 11/13/2011 12:13:25 AM PST by bruinbirdman
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To: bruinbirdman

didn’t the MSM try to make it sound like everything will be better with Berlusconi out? As if changing one statist regime for another fixes anything.


2 posted on 11/13/2011 12:47:07 AM PST by GeronL (The Right to Life came before the Right to Happiness)
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To: GeronL
"didn’t the MSM try to make it sound like everything will be better with Berlusconi out?"

The EU gave that impression to the MSM.

It will be good 'til Monday.

yitbos

3 posted on 11/13/2011 12:57:30 AM PST by bruinbirdman ("Those who control language control minds." -- Ayn Rand)
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To: bruinbirdman

That long? heh


4 posted on 11/13/2011 1:03:30 AM PST by GeronL (The Right to Life came before the Right to Happiness)
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To: GeronL
"The global bond market is worth $100 trillion (£62 trillion)...a number so large it is scarcely comprehensible"

FWIW, that equals about $11,111 for every person on the planet.


5 posted on 11/13/2011 4:08:41 AM PST by ex91B10 (We've tried the Soap Box,the Ballot Box and the Jury Box; one box left.)
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To: GeronL
didn’t the MSM try to make it sound like everything will be better with Berlusconi out? As if changing one statist regime for another fixes anything

Here is the best theory/explanation I have seen of this:

Every single scenario that has Europe either come closer together or break up in an orderly fashion is full of holes. What's left, then, is chaos. The rise to power of Papademos in Greece and Monti in Italy will not change this. What it will do is put a much harder squeeze on the people of the countries.

There should be mass protest against the developments in the streets of Athens and Rome, but people have not yet processed what is happening. When they do, it will in all likelihood be too late. Monti and Papademos are there to execute a short lived "transition" job, and to then vanish.

To sign a whole bunch of things into law which facilitate yet another round of bailouts and other support measures for their financial industries, and which will cause enormous hardship for the people (you ain't seen nothing yet). Afterwards, someone else can take over and claim it's not his/her fault.

From Automatic Earth

6 posted on 11/13/2011 6:31:22 AM PST by Vince Ferrer
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To: GeronL
didn’t the MSM try to make it sound like everything will be better with Berlusconi out? As if changing one statist regime for another fixes anything.

Berlusconi will be replaced by a EUrocrat puppet, that will be the fate of all the once democratic nations of the Eurozone.

7 posted on 11/13/2011 8:52:14 AM PST by Mike Darancette (999er for Cain.)
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