ARmy Rumour SErvice

Originally Posted by alib

The greatly devalued Pound has the same problem as the over valued Swiss Franc its tied to a bloated national banking sector in an economy heavily entangled in the Eurozone and vulnerable to to Black Monday type runs. I hold both but I've regretted not getting out the Pound entirely lately. Neither are much safer than holding Euros.

The DC like London has furiously been printing money for a couple of years but I'd bet on the dollar in the longer term simply as I have some faith that the Septics have scale, strong fundamentals and can usually be counted on sort themselves out. I've noticed quite Septic-skeptic German colleagues are thinking the same way. They tend to giggle and mime toilet flushing if you suggest diversifying into Sterling.

Interesting - what's your view on AUD? Some good fundamentals like commodities, strong connections to Apac and China, connections to the Dollar, Aussie banks seem OK, current government has spunked the surplus on green schemes and bribing mong voters but they look weak. Manufacturing not great and does not have the scales but it looks OK.

Originally Posted by benjaminw1

Buy Gold....

Three years ago.

Seems the Italian president is reading my arrse posts and has given Silvio his marching orders, a new government will hopefully be formed in the next days, exactly what needs to be done is simple and has been on the table for months.
For all you sensationalists out there, you only need to understand what you read. Italy was supposedly going bust at 6%, then 7% - how about 8 or 9%? Irrelevant, unless used in the context of the word unsustainable - which for the hard thinking means "over a long time". Italy has a very strong economy which is poorly managed due to weak government. Fix that (which has taken a bit of provocation), and you fix the problem. There is absolutely ZERO chance of an Italian default or restructuring being needed, which is just as well because IT bonds are propping up most European pension schemes.
PT will probably need to have its debt restructured at some point, it is going in the right direction at the moment, but that cannot last.

Markets try to make money out of reasonably consistent forecasts. At the moment that is very hard as even agreements that are eventually made are painfully slow to implement. But nobody is going to turn to world off just because there is a bit of a flap on.

Originally Posted by Alsacien

Italy has a very strong economy which is poorly managed due to weak government.

If Italy has a stong economy then why are interest rates on 10 year debt over 7% despite ECB intervention? And why are stock markets in free fall.

Italy's problems are structural. It has lost competitiveness within the Euro and is thus importing more and exporting less. This has resulted in a balance of payments problem, increasing debt and now a loss of confidence by the markets. This graphic from the Telegraph pretty well says it all.



Wordsmith

Originally Posted by Wordsmith

From the Telegraph's live blog

Debt crisis: live - Telegraph



If interest rates for Italian 10 year sovereign debt stay there for more than a week, it's very likely Italy will need a bailout.

1) Italy can't afford to pay interest rates of 7% on its debt.
2) The clearing houses (LCH Clearnet, etc) will raise their margins making it more expensive to trade in Italian debt.

Italy needs to roll over 300 billion Euros of debt this year. There is only 250 billion Euros in the EU's bailout fund (the EFSF). Merkel, Sarkozy and Berlusconi must be having a competition to see who's got the biggest brown stain in their underwear.

Wordsmith

I don't have time to correct all of your errors, but this one is substantial:

Italy has about 200 billion of bond maturities BY END 2012. The government liability in 2012 is just over a 100 billion. So why not add a few things together then reduce a year plus timeframe to a matter of weeks. I don't know you or your dodgy sources splatter this misleading nonsense around, I fail to see any benefit.
They have a small auction tomorrow, and another on Nov 14th - with enough in the treasury not to go back to the markets this year. Bit of a difference.....

Originally Posted by Wordsmith

If Italy has a stong economy then why are interest rates on 10 year debt over 7% despite ECB intervention? And why are stock markets in free fall.

Italy's problems are structural. It has lost competitiveness within the Euro and is thus importing more and exporting less. This has resulted in a balance of payments problem, increasing debt and now a loss of confidence by the markets. This graphic from the Telegraph pretty well says it all.



Wordsmith

You do know what the G7 is don't you?

As for the rest you clearly have not been listening.

Originally Posted by Alsacien

Italy has about 200 billion of bond maturities BY END 2012. The government liability in 2012 is just over a 100 billion. So why not add a few things together then reduce a year plus timeframe to a matter of weeks. I don't know you or your dodgy sources splatter this misleading nonsense around, I fail to see any benefit.
They have a small auction tomorrow, and another on Nov 14th - with enough in the treasury not to go back to the markets this year. Bit of a difference.....

Urm, because like any dodgy company when the market loses confidence in it and its management the cost of borrowing increases and in many cases will not be renewed or replaced by lenders. That is the current situation that Italy faces. A 500% (give or take) yield difference kind of indicates that.

Originally Posted by bokkatankie

Urm, because like any dodgy company when the market loses confidence in it and its management the cost of borrowing increases and in many cases will not be renewed or replaced by lenders. That is the current situation that Italy faces. A 500% (give or take) yield difference kind of indicates that.

Exactly.
Restore that confidence by replacing the management with a more competent and trustworthy one, take the measures that are needed to reduce spending and promote long term growth - which are transparent, and voila!