Italy next to go down?

The EU is having an emergency meeting to deal with the potential failure of the Italian economy as well as the 2nd Greek bailout. Seems the European Union is really against the ropes these days. Combine that with the US Debt and the possible upcoming debt ceiling issue and it appears the Western World is much closer to the brink than most of its citizens, at least the American ones, are even close to being aware of.
link:
www.reuters.com...

(Reuters) - European Council President Herman Van Rompuy has called an emergency meeting of top officials dealing with the euro zone debt crisis for Monday morning, reflecting concern that the crisis could spread to Italy, the region's third largest economy.

link:
news.yahoo.com...

This news combined with Geithner's recent statements make me think we are about to get fully into this new Global Depression.

He says President Barack Obama rescued the United States from a second Great Depression and will keep working to strengthen the economy. But Geithner says will be some time before many people feel like the country is recovering. Geithner tells NBC's "Meet the Press" that it's a very tough economy. He says that for a lot of people "it's going to feel very hard, harder than anything they've experienced in their lifetime now, for a long time to come."

If people will be hurting worse than they ever had before and it will last for a long time to come, then how exactly did Obama rescue anyone from anything? Sounds like a 2nd Great Depression to me.

Greece, Portugal, Ireland Italy, Spain - the PIIGS contagion, then onto other EU countries and repercussions throughout the global economy.

Once again Europe's debt crisis has metastasized, and once again the financial authorities face systemic contagion unless they take immediate and dramatic action.

If the ECB's Jean-Claude Trichet is right in claiming that Europe was on the brink of a 1930s financial cataclysm a year ago - and I think he is - it is hard see how the threat is any less serious right now.

Fall-out from Greece flattened Portugal and Ireland last week. It is engulfing Spain and Italy, countries with €6.3 trillion of public and private debt between them.

"We believe the European sovereign crisis might be entering a new phase with contagion reaching the larger economies," said Jacques Cailloux, chief Europe economist at RBS.

The PMI data for Italy and Spain have dropped below the recession line. The Goldman Sachs global PMI indicator shows that 80pc of the world is tipping into a slowdown, including India and China. Taiwan's bell-weather exports to China sank 12pc in June from the month before.

The calamitous US jobs data released last Friday leave no doubt that the US remains trapped in depression. Broad U6 unemployment rose from 15.8 to 16.2pc in June; the numbers in work fell by a quarter million to 153.4m; the average time without a job reached a fresh record of 39.8 weeks; hourly pay fell; hours worked fell; the employment/population ratio crashed to new lows of 58.2pc.

It is almost pointless trying to establish exactly why this latest bout of contagion has erupted. You can blame Moody's for its downgrade of Portugal, or blame Germany's Krieg against private investors for forcing Moody's to act the way it did. The deeper cause lies in the entire machinery of wreckage created by the Maastricht process since the mid-1990s.

A full-throttle global recovery would mitigate this; a half-decade of super-easy money by the ECB to weaken the overvalued euro and stave off debt deflation would help, too. Without either, Italy and Spain can only pray for a miracle.

Italy and Spain must pray for a miracle

I'd counter that "supereasy money" is exactly how we got to this point. If anything, the current crisis is further proof (along with many instances throughout the last 6000 years of human history) that Keynesian economics are destructive in the long run. Considering a lot of this crisis came from bailing out banks that were making foolish gambling investments, I'd say just let em die. Also, let smaller communities - states, counties, etc (& whatever the equivalent would be in Europe) become self reliant and self sufficient. A dangerous proposition to central governments, central banking, and multinational corporations sure, but better for the vast majority of humans. End the ECB, end the Fed, shrink centralized governments to naught but administrative duties and diplomatic forums and let the market work from there.

As euro zone finance ministers meet to discuss the latest plan on the table aimed at solving the Greek debt crisis, one fund manager is warning that Italy and Spain will be downgraded, raising the possibility of "carnage" for global markets.

“Italy was until recently deemed by the market (not by us) to be the ‘safe’ peripheral country, and a lot of international investors have been overweight Italy versus benchmarks as a proxy against zero holdings in Portugal, Ireland, Greece and Spain,” said Mike Riddell, a fund Manager at M&G in London in a research note.

The bears’ main worry is how Italy can prevent its high public debt/GDP profile from deteriorating given its appalling growth outlook,” said Riddell.

“As Italy or Spain or whoever’s bond prices collapse, the borrowing costs rise. As the borrowing costs rise, the interest costs steadily rise and the fiscal situation deteriorates.”

“As peripheral sovereigns blow out, banks need to raise more and more capital to cushion themselves against the cost of future sovereign restructuring, but this bank capital will get increasingly expensive just at the time that the banks need it most,” Riddell wrote.

Warning that rising sovereign and bank borrowing costs will lead to credit rating downgrades in both Italy and Spain, Riddell is worried the confidence genie is now out of the bottle.

Italy, Spain will mean more 'carnage': Fund Manager

The news keeps on a coming because the situation keeps on a deteriorating and spreading.

Originally posted by surrealist
Greece, Portugal, Ireland Italy, Spain - the PIIGS contagion, then onto other EU countries and repercussions throughout the global economy.

Given that Italy is the fourth largest economy in Europe and as it has been said by me that the U.K. is next to follow i would assume that your obvious point to PIIGS is a somewhat a sensational headline to say the least. People aren't even aware that the U.S. must raise its loan ceiling otherwise it will default. Does this sound familiar, well it should, it was the headlines that have been orchestrated to be flashed across the news and newspaper's along with the internet media houses. So why isn't the world reacting to the U.S. impending default. Well simply because it is practically impossible even for a giant like the U.S. economy to recover from 14 odd trillion to 4-5 trillion within ten years.

Recent and suicidal budget spending cuts to be imposed upon the U.S. citizens similar to what Greece was forced to adhere was/is the test bed for the U.S. economy. The administration is gearing to cut major spending across the board beginning with foreign aid and then follows the internal budget cuts to citizens benefits. First signs of impending crash are cuts to foreign aid and internal budgets promoted as future and long term planning. This simply is re-adjusting the internal budget as a spontaneous reaction before the real hard cold fact of what the economy is about to be faced with.

It is a well known fact that the American dollar no longer holds it's weight within the global exchange, we have indeed entered dangerous times as history has shown us that when the capitalist system begins to fail there is only one outcome and that outcome is what is generally referred to as a world war. Do not brush aside what history has taught us, as it is the window to our future. As a person who has investments across three continents it is extremely alarming that there is no room to maneuver or adjust for a wishful but elusive bear market other than adjusting and re adjusting as the compression rate of viability as a business are constantly contracting across all sectors.

If anyone out there is listening the only form of advise i would give to everyone is to instantly stop all forms of spending and adjust your family or business budget's right away. Family and business budgets as they stand need to be adjusted by 30%-40% reduction to meet impending tax and inflation that await you and myself and several hundred million other people. My reply is in no way a doom and gloom reply, but it is a cold hard fact of what is currently being served from the menu.

Ominous. The Great Depression started October 1929 and the nation didn't recover until WWII created production demand in 1941, twelve years later. We're three years into this economic 'kinetic action'.

One misstep in 1929 by government that Bernanke overly focuses on is government inaction, and Fed raising interest rates to tighten credit lines to business. Three years later in 1932 unemployment peaked at 23.6%, followed by a deflationary spiral in 1933.

The crash in our time started in September 2008. The government poured money into the banking system to keep the system running when (real estate backed) securities rapidly deflated. In 2008, the percentage of people not working went from 38.3% (89.9M) to 41.8% (99.1M). Three years later in 2011, percent of people not working is 41.6% (99.5M). We now have 9.6 Million more people not working than in October 2008. Businesses don't want to spend and hire because they don't know what government taxes are coming, further hurting employment.

Pouring money into banks simply kicks the can down the road. Nothing that caused the bubbles and collapse have been fixed. No one was prosecuted for causing the 2008 crash because it was government policy that forced banks to make loans to people they shouldn't have, and that created the real estate bubble. Banks found they could insure the loans, so they were happily inflating the bubble. Today the nation is engaged in class warfare and wants to tax the rich (businesses), which will have the same cash draining effect as tightening credit in 1929.

The country turned hard left during Roosevelt in the early 1940s, who imposed socialist entitlement programs still with us. The country reacted and turned hard right during the late 1940s and 1950s as the political pendulum swung. Today the country took a hard left during the Obama elections, who is attempting to impose even more socialist entitlement programs. Historically the country will take a hard right afterwards, but won't be able to fully shake off the entitlement programs imposed. Why? Because money to politicians is involved, and the entitlement program means revenue to feed government bureaucracies. Historically worse, the world started preparing for war eight years after the great depression started. In our day, five years from now (2016). Some cycle analysts are saying as early as late 2012/early 2013.

Originally posted by louieprima
I'd counter that "supereasy money" is exactly how we got to this point. If anything, the current crisis is further proof (along with many instances throughout the last 6000 years of human history) that Keynesian economics are destructive in the long run. Considering a lot of this crisis came from bailing out banks that were making foolish gambling investments, I'd say just let em die. Also, let smaller communities - states, counties, etc (& whatever the equivalent would be in Europe) become self reliant and self sufficient. A dangerous proposition to central governments, central banking, and multinational corporations sure, but better for the vast majority of humans. End the ECB, end the Fed, shrink centralized governments to naught but administrative duties and diplomatic forums and let the market work from there.

I read "supereasy money" and Keynesian economics in back to back sentences. As if, you were going to clarify on a valid point. Since you failed, I'll sum it up... The market is working exactly how it was designed. Centralize wealth, privatize our entire planet's resources... All the while continually monopolizing the lowly consumer within every facet of life.

The only hope was government intervention, but global governments are outright pathetic, bought and paid for, naturally overbearing, or all of the above. I'm sure your guess is as good as mine when we stick to the fundamentals.

Italy is much bigger than Greece.

All pigs will go down.

Portugal, Ireland, Italy, Greece and Spain. If Greece goes down, France goes down. If France goes down, the EU goes down.

America will also go down. The UK too. China too. Japan too.

We're all going down.

Originally posted by Vitchilo
Portugal, Ireland, Italy, Greece and Spain. If Greece goes down, France goes down. If France goes down, the EU goes down.

America will also go down. The UK too. China too. Japan too.

We're all going down.

I can see your cup is half empty!

The truth is that the larger economies are just more able to cope. The UK economy is different from Italy, as the Italian economy is different from Greece.

There're just too many statistics which can be interpreted in too many different ways. However, the IMF publish statisitcs on public owned (government) debt and it seems the higher the public debt in comparision to the size of the economy is the worry. The US may have a high debt, but they also have a (frankly) massive economy - second only to the EU.

Greece is 130% of GDP small country / economy
Italy is 118% of GDP - medium country / economy
Ireland is 93% of GDP - small country / economy
US is 92% of GDP - large country / economy
France is 84% of GDP - medium country / economy
UK is 76% of GDP - medium country / economy

It's not ll doom and gloom.

Regards

The world is getting interesting that's for sure.

How it turns out is anyone's guess I suppose.

reply to post by cerebralassassins


Not sure what you mean by 'a sensational headline'? My use of the term or the article headline I cited? I certainly wasn't trying to sensationlise anything, I believe my statement has some validity given developments in the Eurozone currently and among the PIIGS countries in particular (Portugal, Ireland, Italy, Greece, Spain).

Other than that, I appreciate you sharing your perspective as an investor. I also don't dismiss the US situation as trivial by any means, though I think the US has a little more resiliance (for the time being) due to having a reserve currency and control over printing USD, so to speak. But again I see this as only buying time and developments in the Europe could well certainly hasten a financial crisis in US where contagious adverse impacts occur.

reply to post by cerebralassassins


Haven't the US just announced that they are stopping....not cutting, all aid to Pakistan? This fits with what you said about cutting foreign aid being the 'canary' so to speak.

Also, to everybody, I have not seen this mentioned anywhere but the recent E-Coli outbreak in Europe was primarily blammed on Spain. The UK has pledged something like 65million (never knew we bought that many cucumbers from Spain! ) other countries are to follow suit, all this for Spain's 'lost revenue'......sounds like an interest free bailout to me!....just thinking....

Rainbows
jane

Originally posted by surrealist
reply to post by cerebralassassins

 

Not sure what you mean by 'a sensational headline'? My use of the term or the article headline I cited? I certainly wasn't trying to sensationlise anything, I believe my statement has some validity given developments in the Eurozone currently and among the PIIGS countries in particular (Portugal, Ireland, Italy, Greece, Spain).

Other than that, I appreciate you sharing your perspective as an investor. I also don't dismiss the US situation as trivial by any means, though I think the US has a little more resiliance (for the time being) due to having a reserve currency and control over printing USD, so to speak. But again I see this as only buying time and developments in the Europe could well certainly hasten a financial crisis in US where contagious adverse impacts occur.

By sensational i am as you pointed out referring to the term " PIIGS " , now if you do actually have any form of contact with people from those nation's and you were to use that term as a description then you would also understand that it is considered offensive.

In regards to perspective, i was and do point out the oncoming budget cuts that will fall heavy upon every u.s. tax paying citizen unlike never seen before. There is a true trend within the global economy and that trend is to downgrade the standard of living on a financial level across the world, this is no hypothetical scenario but a realistic inevitable outcome as everyone is gradually viewing the tip of the iceberg concerning almost all of the european nations and the u.s. or the u.k. will not be excluded based on how the markets have been tweaking. In short, we are all living in a bubble economy.