“The party is over”
Whether it was a realization that Italian politics are sclerotic regardless who the PM is or LCH Clearnet raising margin requirements for those trading all Italian government bonds, Italian yields are spiking. The moment of truth for Italy is now here with their yields 2 yrs and out firmly above 7%. As the WSJ reported today, a board member of Enel, the major Italian oil company, said it best, “It’s time to tell the truth to Italians. No.1: The party is over.” The party he’s referring to is the current Italian welfare state as the same parties are getting shut down in other countries. The bright side of this is the bond market is forcing change that can no longer be ignored. Italy is a big, wealthy country and it is in their power to liberate their economy and cut spending. In China, Oct CPI rose 5.5% y/o/y, in line with expectations but at the slowest pace in 5 months. PPI rose 5%, below the estimate of 5.8%. Both Retail Sales and IP rose solidly but slightly below the forecasts. The Shanghai index did rally on the inflation moderation but it’s still unclear at what level will satisfy Chinese officials to get them to ease policy as inflation is still very elevated. In the US, refi’s rose 12.1% in response to a further drop in mortgage rates to 4.22%. Purchases rose for a 3rd week to a 3 month high by 4.8%. II: Bulls 44.2 v 43.2 Bears 34.7 v 36.8
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November 9th, 2011 at 9:08 am
Which party?
http://www.bloomberg.com/news/2011-11-09/financial-alchemy-undercuts-capital-regime-as-european-banks-redefine-risk.html
November 9th, 2011 at 9:11 am
Word has it, Italy has the same piss-poor tax collection problems that Greece does.
November 9th, 2011 at 9:20 am
“The party he’s referring to is the current Italian welfare state as the same parties are getting shut down in other countries.” Nice spin, but not reality……….. the most fiscally sound countries in Europe (and the developed world, for that matter) are all social democratic “welfare states”………. the difference is that the fiscally sound ones actually pay for it via imposing and collecting taxes………. much unlike the U.S. and southern Europe.
November 9th, 2011 at 9:24 am
Party? Welfare State? Wasn’t it the banks that created this disaster?
This guy thinks the citizens should have to pay for it ? I call bulls**t.
November 9th, 2011 at 9:26 am
I’m with you Frilton..”party is over’..for tax evaders and offshore haven creators. “The lesson from Greece and Italy” is you can’t let oligarch hide all there income offshore, off the books, capital gains and carried forward interest etc.
As a member of the 1% who earns wages and pays payroll taxes..I want my fellow 1%er and there tax scams to “learn the lesson of Italy and Greece.” These people undermine the integrity of the system.
November 9th, 2011 at 10:01 am
gman Says:
November 9th, 2011 at 9:26 am
” …. As a member of the 1% who earns wages and pays payroll taxes..I want my fellow 1%er and there tax scams to “learn the lesson of Italy and Greece.” These people undermine the integrity of the system. ”
Despite the label of “1%”, it’s important to note that polls among the $1 million + income group show better than 65% in favor of tax increases for that group as proposed recently by Obama.
The entire problem revolves around the political influence a vastly small minority has, Koch brothers, Grover Norquist, Rupert Murdoch and others.
I suspect the E.U. has the same problem, but I certainly hope wealthy individuals don’t become labeled because of such a small minority, it seems they too arew divided in equal proportion to everyone else….ranging from 65% to 70% in favor of tax increases.
November 9th, 2011 at 11:29 am
@paulie46 @gman I can tell you that Greek 1% are just as responsible for the problems as the 99%. While the common Greek lived high from low productivity:wages, then slipped into a nice pension, Greek 1% took billions in corrupt construction projects funded by the EU.
The same now goes for the United States. You have far too many people living off small amounts from the welfare system … and a small group of people living of massive bail out amounts provided by the state.
I am in the 1% … I love capitalism … I hate what it has evolved into. Nothing short of extortion … “We fucked up but you need to pay for it or we’ll crash your system”.
The masses are waking up to this and we 1% will pay sooner or later. We either start playing within the rules, or start living behind machine gun guarded walls a la Brazil.
Take your pick … but one of these is going to happen.
George … The Greek … From Canada
November 9th, 2011 at 11:32 am
The party that is over (one way or the other), is the party of the 1%’ers. They won the class war and are about to lose the peace. They may yet cause a lot of hurt on regular people because they refuse to let go of the old trickle down ideology that initially made them so rich. But we are done with that, it can no longer enrich even the rich. Another round of it will just slowly destroy the value of their investments. The only way to grow the economy from here is to give more money to the consumer class, and we are past the point where that can be “financed” by increasing debt. So money have to move out of the top 1% investor class in order to finance the increases in the consumer class (which is the ONLY way to grow our economy). Alternatively everybody will lose as the economy stalls and choke on the debt that has been left as the legacy of the “tax-cut and borrow for spending” policies of the trickle down fools. The smarter people in the top 1% group understand that, but the sociopaths amongst them are convinced that they somehow can enrich themselves personally even if the structures around them start falling apart. Yes the debt has to be dealt with but by taxing the rich, not by cutting the poor. The moronic idea of increasing the retirement age at a time of double digit unemployment will just further shut down consumption and the economy. Adding more workers to an economy that already operate way below capacity is as stupid as increasing interest rates when the economy is stalling.
November 9th, 2011 at 11:41 am
If you belief the “debt threat” story..even thought US debt service is at a 30 year low..how can you NOT think the Bush tax cuts expiring in the medium term is a good idea? Taxes are at a post 1930s low! Inequity is at a post 1930 highs
Tax cuts for the wealthy
Austerity for the poorest
Bailouts for the most connected
Invade Iran
November 9th, 2011 at 11:43 am
I sometimes feel like I’m not even on the same planet of 50% of the people. Fox has really created a alternate universe.
November 9th, 2011 at 4:11 pm
@gman
Can you explain a few things about the debt?…
!. Who owes the money?
2. Who is it owed to?
3. Where did it come from?
November 9th, 2011 at 4:30 pm
Republican offered to raise tax revenues by cutting taxes on the one percent and raising it on the middle class, democrats didn’t go along. Is it possible that the 1 % only own one party or more likely the democrats are posturing for the upcoming election?
November 9th, 2011 at 5:35 pm
dougc;
There are certainly more democrats refusing to pimp for the 1% than there are GOPsters (I can not even think of a single GOPster not openly pimping for the 1%). However, the 1% also have strong and increasing power over the democrats. So it is likely that a good amount of posturing went into the decision to reject an outright attack on the middle class to lower taxes on the 1%.
November 9th, 2011 at 7:32 pm
@paulie46
To answer your questions, using the same numeration:
1. The Banks
2. Other Banks
3.Leverage, aka nowhere
I hope that helps.
November 9th, 2011 at 7:32 pm
@paulie
1. I was refering to fed. debt
2. Google it. The pie charts of who owns US debt are all over…Asian central banks come to mind as big marginal buyers over the past decade.
3. Most of Asian CB purchases come as a result of need to something with massive reserves they accumulate as a result of keeping there currencies undervalued.
November 9th, 2011 at 9:30 pm
Absolutely hilarious – the assertion that catering to 99% of the population’s needs vs being bought by less than 1% is “buying votes to win elections”.
I got some news for anyone who thinks that – it’s true!
Another word for that, Democracy.
Furthermore, the idea of allowing any minority to grasp control of our government against the will of the people also has a word attached to it in the Constitution, the word – “insurrection”.
November 10th, 2011 at 7:41 am
Guys, the answers to the quiz:
1. The Fed – to itself – it creates the “money” out of thin air and ends up holding the liability (T-bills).
2. The Fed owes itself – no other entity is liable.
3. The Fed created it out of thin air, the Treasury ends up with the cash, the Fed ends up with the liability.
Bank assets do not increase as a result of the govt. financing op (except for a brief moment in time).
Bonus question: who gets the interest?
November 10th, 2011 at 10:21 am
interest > banks 1st (employees that handle exchanges) with excess trickle down to bondholders / but bondholders need a churn catalist and someone/something to feed them a pumped up corn product .. ring around the rosie
November 10th, 2011 at 10:45 am
@ Greg0658
Banks don’t receive interest on the National Debt – bondholders do (unless banks choose to buy bonds rather than lend).
The simple answer – most of it goes into the economy, the rest to foreign bond-holders. None (or not very much) goes to the 99% however.
Once banks acquire T-Bills with excess reserves (created by the Fed) they are swapped with the Fed for more reserves. Reserves do not become “money” unless loans are made or they are spent into the economy through deficit spending, but only deficit spending can add financial assets (cash) to balance sheets in the aggregate.
The QE’s reduced spending and therefore reduced incomes (by lowering the portfolio interest rate).
Something many seem to ignore – without spending the economy doesn’t exist. Saving, i.e. income not spent aka wealth accumulation is like cancer to the economy unless another entity spends. Who might that be?