Italians want to cut debt, but without sacrifice

[dipsydoodle]

Source: AP / Google

ROME (AP) — An AP-GfK poll shows that 93 percent of Italians consider cutting the country's huge public debt a top priority but few are willing to make personal sacrifices to do so.

The poll released Tuesday shows only about a quarter of Italians favor reforming labor laws to make it easier to fire workers or approve of raising the retirement age to 67. Those reforms are considered critical to curbing Italy's public spending and boosting its economic growth.

The poll shows that most Italians retain a favorable view of the European Union and 76 percent think Italy should stay in the 17-nation eurozone.

Last week's poll came during the first days of economist Mario Monti's new government, brought in to tame Italy's 1.9 trillion-euro ($2.6 trillion) debt. Market turmoil and loss of confidence in Italy's ability to repay its debts forced Premier Silvio Berlusconi to resign Nov. 12, ending his 17-year domination of Italian politics.

Read more: http://www.google.com/hostednews/ap/article/ALeqM5j438Wg3ERbpE-ho1Bt7x2PkVUfHw?docId=67ffcf290e2a40c5bb21d47e120a04b8

[whistler162]

1. A truth all over the world.

[dipsydoodle]

3. Ironically it could be done in Italy

without any short term adverse effects to the public. Italy's state owned assets far exceed their debt. They could sell off the whole lot. The effect of that long term however could be disasterous.

[sharp_stick]

2. Gee who knew they were so much like us n/t

[bloomington-lib]

4. Their arm will be twisted behind their back until they agree to sacrifice

[sulphurdunn]

5. What sacrifices are Italy's

creditors called upon to make?

[dipsydoodle]

6. Sufficient to fuck the USA hopefully

Retribution for the absense of financial regulation which contributed to this mess.

[bossy22]

7. Actually

Our financial Deregulation just made our banks more "European". So why don't we blame them....

[Yo_Mama]

11. Because we are responsible for our own deeds

But you're right. The argument in the US leading up to the Clinton era financial deregulation was very much focused on the fact that big US financial institutions weren't able to make the kaboodles of money that European FI's were making due to our "outmoded" regulatory structure.

It was a mistake of historic proportions.

[Yo_Mama]

8. With bond yield rising so high

Italy's current creditors (those who had previously bought bonds) have taken a substantial real loss on their investments. If they can afford to hold them long enough, they'll get paid back in full if Italy can. But if they have to sell before them, or if they have to mark to market, they have already taken a loss.

When yields drop, current bondholders get a big benefit. When yields rise, current bondholders take a big hit.

[msongs]

9. speculators want to win both ways as long as someone else gets screwed to do so nt

[Yo_Mama]

10. Most buyers of sovereign bonds are not speculative

You only get the speculators in the market during times of rapid change, which only occurs in the bonds of countries that have traditionally been written off as good credit long ago - mostly smaller, in the post WWII world.

Traditionally across most developed nations, buyers of sovereign bonds have been trying to accumulate risk-free low-yield investments to fund retirements or to store reserve capital (such as banks). That's one reason why Europe's banks are so threatened now - because sovereign bonds, which they had accumulated on their balance sheets as mostly riskless investments, didn't use to require reserves and now do, they have to pull money out of other investments to accumulate a loss reserve.

There probably is some speculation in Spanish/Italian bonds right now, but that's a mark of a failing market.

Most people on the street probably think that the purpose of investments is to make as much money as possible, but it isn't. Every household, every business and most especially, every financial business, needs a safe store of value where they can "park" what is essentially operating capital. For a household that is money to pay basic bills (food, utilities, insurance, gas) for a month or two, and for businesses it is literally money required to keep operating. For banks is it their reserves. Sovereign bonds are one of the best ways to do this - and in the US, the stability of Treasuries makes them the backstop to the US banking system.

If US Treasuries were ever to find themselves in the fix that Italian and Spanish Treasuries just developed, it would shut down the US banking system nearly overnight. And worse yet, the average person doesn't know it, but the FDIC fund that ensures our banking deposits is wholly dependent on the creditworthiness of the US Treasury. The US relative stability is now forcing this economy, and just a few others, to provide this source of stability for an entire world.

This is very, very serious. We have not seen such a crisis in the global economy since the Great Depression. The only alternative to sovereigns are hard assets (gold, silver, commodities), and as faith in the US long bond begins to break, we could see a very disastrous situation develop by 2014-2015.

[freshwest]

12. Thanks for one of the best explanations of what underpins the system.