By Christopher Hessman
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The Italian Premier Silvio Berlusconi doing what many investors wanted - announcing he will stand down as premier - the implicit price that Italy has to pay to borrow has risen again, nearer to dangerously unaffordable rates.
This morning the interest rate - the yield - on one year loans to the Italian government rose from 6.4% to 6.63%, and there was a rather smaller rise to 6.79% in the rate on 10-year loans or bonds (before a slight retreat back to 6.76%). Euro era highs for these implicit interest rates - very worrying for a government with more than 1.8 trillion euros of debt. I told you in Europe to buckle up your socialist ways will come home to roost. We here in the United States Need to cut our foreign aid to pull our pants back up. This will us to be able to sow up the large whole we put in them (pants). Our next step would be to dissolve the Department of Education and privatize it and take all the union power off the table all together. These teachers should be tested at least twice a year to keep up with education needs of the students not the teachers. I do believe they should be paid accordingly. I just believe in order for the US to pull itself back from the cliff we must take huge cuts to things supposed to be sacred cows.
Now back to Italy, what this means for them is that the cost for Italy of borrowing is becoming dangerously close to the 7% threshold, which the precedent of Ireland, Portugal and Greece suggests would mean that Italy would be unable to avoid an official rescue.
To put it in simple terms, if Italy had to pay an average interest rate of 7% on the whole of its debt - which would only happen over years, since it borrows at fixed rates for fixed periods - that would add a crippling 70bn euros to its annual interest bill. What this means to the average person is that Italy would get to a point very quickly to where it could not pay for its debts and they would become out of reach. It has been said that Italy would have to borrow 362bn euros next year simply to pay interest and existing debts falling due. The people who have been in charge have not be paying attention is what the problem is they just kept spending and promising more and more. Well, now the money is all gone and the people suffer not the leaders. It seems Europe is in for more hardship before the wrinkles of spending are pressed out. Stock up on potatoes and rice.
The IMF so that it can, in turn, lend more money to Eur-ozone countries like Greece, Italy or Spain who are struggling to service their debts. These countries should alone restructure their debts in bankruptcy court than to keep throwing good money at the bad debts.
The IMF’s responsibilities: The IMF's primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with one other. This system is essential for promoting sustainable economic growth, increasing living standards, and reducing poverty. Following the recent global crisis, the Fund has been clarifying and updating its mandate to cover the full range of macroeconomic and financial sector issues that bear on global stability. Now you have to stop and ask yourself how is that working out for you?
This also affects Asian stock markets opened sharply lower on Thursday after Italy's record-high cost of borrowing renewed fears over the eurozone crisis. Japan's Nikkei index fell 2.8%, South Korea's Kospi shed 3.7% while Hong Kong's Hang Seng dropped 4.4%. The falls in Asian markets follow losses in US markets. Economists are concerned that the global banking system could still be impacted, regardless of whether there is a resolution to the euro-zone crisis. Euro continued to weaken on Thursday, touching a one month low of $1.35 against the US dollar, and a two-week low of 105.1 yen against the Japanese currency. What ever they do European recessions will hit and people will fill it before the leaders in their towers of these European countries.
Let us not fool ourselves the United States is the largest contributor to the IMF. We need to CUT SPENDING ACROSS the board. This would included Congressional and Presidential paychecks roll back amounts they are paid every month, We The People have to cut back so should you!
I just pray we all survive all this craziness that is taking place all over the Globe.
GOD BLESS to the HUMAN RACE!
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