>The ECB’s Governing Council held an emergency meeting Wednesday as the prospect of the first interest-rate increases in a decade to tackle record inflation sent Italian yields to their highest since 2013, widening the gap over equivalent German notes. >The ECB faces challenges in German courts over the PEPP program, while a previous challenge over the public sector purchase program saw the ECB have to provide information to justify the policy. >“We remain skeptical of the idea that the ECB can single-handedly preserve market and price stability if governments’ debt sustainability is questioned,” strategists at Societe Generale said. “Even if the ECB can deliver a sizable anti-fragmentation purchase program, eventually governments will need to sit down and discuss necessary reform.” I don't think it can even be comprehended how hard this continent is going to implode adding this on top of everything else.
When credit spreads on Italian bonds widen to >2% and yields on the 10Y go to >6%. Just be on the lookout for the words "credit spread" and "Italy".
Ethan Parker
>putin's price hikes
Gabriel Jones
Even if we default, majority of debt is owned by Italians themselves. And for the institutional investors, who cares. As if I care if Globohomo doesn’t get his money back. It will be a badge of honor instead.
Hunter Smith
This is global. Granted different nations have slight variations in how pressure will manifest beyond just the economic, it truly will be quite the spectacle because basic economics need to be applied via central banks in order to bring inflation down, which requires the rising of interest rates, which in turn adds pressure to already stretched and over-indebted household budgets.
Those who have borrowed and spent beyond their means will be the most affected, both individuals and companies.
William Thompson
Germany won't be able to bail out the EU this time
Isaac Miller
>because basic economics need to be applied via central banks shalom
Jack Collins
>Those who have borrowed and spent beyond their means will be the most affected, both individuals and companies. As it should be. It’s time for these high time preference faggots to pay.
Jason Lopez
Kek thanks Bruce Why specifically Italy? Globohomo wants hard assets now, not worthless paper.
David Kelly
If we default on our debt, the Globohomo lender is going to lose money.
Ryder Lopez
Are you guys the closest?
Owen Reed
Close to what?
Luis Thompson
That's the reality of the world we live in, whereby central banks take their marching orders from the BIS (the head of the snake). The alternative is a complete and total collapse, which these same centres of power will re-engineer something in their favour from the ashes, likely predicated on a blend of MMT, CBDCs and a potential debt jubilee with serious caveats in the form of waiving assets.
Right now there are some central banks signalling a surrender to fighting inflation by way of not raising rates as a means to "assist" the citizenry's ability to maintain mortgage obligations, but those signals will most certainly be reversed soon as they otherwise see runaway inflation continue and their nation's respective currencies tank.
To curtail runaway inflation, interest rates need to equal it. This 0.5 basis point hike masturbation each month is simply not enough.
Josiah Reyes
Italy has a shit economy due to a number of important factors >an extremely aged population (aged populations can't support high interest rates on debt) >profligate public spending >economy dependent on cyclicals that are vulnerable to recession (luxury goods) The yield on debt indicates the funding costs. If those are higher than GDP growth, then your debt grows faster than your earnings. If you can print your own currency, you can at least nominally service your debt, but the result will be inflation (basically, you're taxing your population to service the debt). If you can't print it, as is the case with Italy, you default. The yield of bonds is also a combination of the growth & inflation expectation (bonds being what you can earn "safely", so if you expect the economy to grow by, say, 4%, you're not gonna buy a bond at less then 4%, since you could invest into the stock market instead), as well as the premium for the default risk - riskier borrowers get higher-interest loans. The default risk is captured by the credit spread, which is the difference between the yield at which the bond is originally sold and the yield at which it trades in the secondary market. If that spread is 2% on top of the primary market yield, that means that the market is pricing in the additional 2% as a default risk. As an example, see the Evergrande-bonds: they're trading at 8 cents on the dollar, and that 92 cent discount is the default risk. If spreads on Italian bonds start widening, it means that the market is pricing in serious default risk.
The Germans need interest rates to rise, constrained as they are, but if the ECB raises them, the Italians will default. The breaking point has been estimated to be at around 6% (after factoring in spread), but that's hard to guess. As for why Italy specifically: it is the most vulnerable economy AND it's also large. Greece will probably default at some point too, but its economy is small enough for that to be survivable.
Alexander Brooks
To defaulting when compared to places like Spain and other indebted countries in the EU?
Jose Fisher
It’s over
Carter Fisher
Agreed. Decisions have consequences. Financial illiteracy is about to be showcased in a truly massive scale (particularly in western "democracies").
Watch and wait for those most impacted to cry foul and point the finger at "the government" for their absolutely retarded financial decisions and absence of basic arithmetic skills.
Debt to income ratios have been hilarious for almost a decade now combined with there being piss-poor means-testing rigidly enforced, yet these absolute suckers kept nuzzling that banker teat. Morons.
It is the availability of cheap and easy credit that which pushes house prices up and these are the morons that enabled it.
Isaac Thompson
>Being the third-largest economy in the eurozone, Italy’s economy is around 10 times the size of that of Greece. Equally troubling is the fact that Italy has the world’s third-largest sovereign bond market with public debt of more than $2.5 trillion. Much of this debt is held by Europe’s shaky banking system, which heightens the risk that an Italian sovereign debt default could shake the global financial system to its core. …the country’s economic performance since 2008 has been abysmal. Indeed, Italian living standards today are around 10 percent below where they were 10 years ago. Meanwhile, Italy’s banking system has become highly troubled and its public sector debt as a share of gross domestic product (GDP) is now the second highest in the eurozone.” >Italian wealth is also illusory. Yes, it is higher than it was a decade ago but it is actually on a downward trend if you look at it over the past 15 years and more, a period in which Italian economic growth stagnated and productivity shriveled. Unless Italians start to save again it is not going to grow further. Indeed, the long-term data trend suggests an ongoing household impoverishment. Italians will not be able to maintain their standard of living without liquidating more and more of their assets, says Alberto Albertini, vice chairman of Ersel, a private bank.
Dunno who will default first, but Italy has a major importance economically speaking. Our GDP is slightly smaller than the California one. Greek, for example, is irrelevant.
