Skip to comments.Italy's borrowing rates skyrocket, Monti scrambles
Posted on 11/25/2011 12:47:50 PM PST by John W
ROME (AP) A week into his new job, Premier Mario Monti is running out of time to reassure nervous investors that his government has a strategy to deal with Italy's crippling debts.
The nation's borrowing rates skyrocketed Friday after a grim set of bond auctions, with a new auction looming Tuesday. Another borrowing debacle could ratchet up fears that Italy has entered a debt spiral driving it toward bankruptcy and the 17-nation eurozone into its most acute crisis yet.
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Certainly something will happen. Eventually. I think. Some think all this is survivable somehow. I think they’re simply whistling past the graveyard. But, given the lack of comments on this post and previous comments on other posts, many freepers are among the whistlers.
But, I saw Obozo sprinkling skittles to the peasants while riding unicorn. I am sure everything is ok./sarc
The SHTF Day will be Dec 29 when 10 billion euros in Greek bonds come due.
Another day in Obamaland.
I’m sure raising taxes will fix this.
Do you have any links about why it’s deflation and not inflation? I understand the difference between the two but was always curious as to how people came to such different conclusions.
I always heard people saying inflation not deflation.
I think all can stop whistling ... other peoples money has run out!
Inflation will help the government continue to be profligate, and it will help some debtors - those who see the new money first, such as the banks. Ordinary folks won't see their income go up quite as fast as their expenses, and will often go broke trying to buy food before they have extra money to pay off the debts.
A bet on inflation is a bet that the politicians and bankers try to save their own butts first.
I agree. They will attempt to print their way out of trouble. Essentially what they’ve already been doing.
So, what do have so far? A leader has yet to emerge. No one has a Program or a Plan. Congress is the same flock of schiessvogel we have come to despise, and the public is more worried about Christmas shopping than politics. WTF, nobody said the Republic would last forever.
When people, companies and banks are going broke, that is deflation in action which has a knock-on effect with other dominoes as the financial system(s) would normally try to right themselves, as expected. Enter politics along with banks as they interfere with typical business cycles trying to ease the pain and paint things as always growing toward prosperity or waiting for economies to pickup. If judging by real estate, it will be a long long wait.
They can inflate the money supply but deflation rages on in the background until debt is paid down, taking decades unless interrupted by wars.
You can see now without another round of QE (injecting credit/money) deflation is dominating with only some steady price increases for staples. Oil/gas prices at the pump are bearable but banks and companies are going belly up one after another. (And so they should)
More QE then inflation will be come apparent. All the while the ship is sinking.
My chart has 2 billion euros on the 16th, 1.2 b. on the 20th, about 3 b. more by the 23rd, 6 b. more by the 30th. That’s 12.2 b. On top of that, another 4 b. in the next three weeks.
You are right, it is going to be ugly! They must come up with more than 5% of their GDP (225 b. euros - 2010 est.) in less than a month - just to service the debt. How can that happen?
“They must come up with more than 5% of their GDP (225 b. euros - 2010 est.) in less than a month - just to service the debt. How can that happen?”
One way would be for the FED to fund the European debt purchases. QE EURO 1 if you would.
There will be much pressure on the FED to do so: (1) Member banks have a lot of exposure to European debt and to the cascade of secondary defaults that will come if Europe goes south; (2) If the EURO tanks, the dollar goes way up and the US stock market tanks. Neither prospect makes the FED or this administration comfy.
The easier, softer path in the short term is to “print” dollars, buy European sovereign debt, and kick the can past the 2012 election. It will all be much more subtle and complex than that. But that’s what it will amount to, imho.
Whether it will work for more than a short period is another thing altogether.
Printing money or creating money through the lending process is inflationary, especially when there isn’t economic growth to compensate. When loans don’t get paid back either because of bankruptcies or sovereign defaults, that destroys money and is deflationary.
Banks are hurt by inflation. Their assets are mostly fixed rate, their liabilities adjustable. They aren't helped by "seeing new money first". Silly idea.
Unless the debt is in dollars, this makes no sense.
The ECB can print Euros to buy Euro denominated debt.