The Fall of Rome

[cwjerome]

I'm surprised this has not been posted. It may rival the Iran-Israel issue in terms of potential damage to the world's well-being. Italy's economy is bigger than India's or Russia's and if their economy tanks (along with the government basically) it could start a chain reaction of default and no confidence that will crush Europe and bring other countries like the US down a lot as well.

One of many articles

Berlusconi needs to step down... that's the first step. Then major austerity measures with international financial backing. People need to suck it up, these are tough times.

 

[wuliheron]

What do you want people to say? The sky is falling? Its been falling for 3 years now and the only ones with any mojo left to do anything about it are the internationals who are about as cooperative, forgiving, and generous as a school of sharks. Do you just like dwelling endlessly on morbid subjects?

 

[PokerGuy]

Good thing we're the hands of experienced capable strong leadership to guide us through. Oh darn, we got a community organizer instead. Doh!

 

[KB]

It has been discussed in the Stock Market and Greece threads, but I am not sure its has its own thread. Its quite obvious that the Eurozone experiment was a failure and needs to be abandoned. Currencies need to be able to raise and fall based on the weakness of the country. The Eurozone prevents that and rewards the strongest nations in the Eurozone because their currency is held down by the weakest.

 

[Macamus Prime]

Hey, lets bash the Italians for next couple of months. Then, when things all work out and the disaster we (including myself) predicted would become 100% true, doesn't even occur - we move onto the next thing to build up and make a mountain out of a mole hill!!

Armchair know-it-alls should get up and actually move around a bit - otherwise your fat ass will be covered in sores.

 

[mshan]

"With high debts, vast underground economies, low birth rates and more pensioners than workers, there is no doubt that Greece and Italy need structural changes to survive. But with deeply entrenched political patronage societies, governments in both countries have been unwilling or unable to carry out such changes, which would require striking the heart of their own constituencies."

http://www.nytimes.com/2011/11/09/w...-deepen-euro-crisis.html?pagewanted=1&_r=1&hp

Also, some good commentary by Sean Egan (end game is ECB printing money to deal with debt, but people in countries are not ready for that yet): http://video.cnbc.com/gallery/?video=3000056048




I also think you need to make a distinction between the acute crisis that is playing out right now in global financial markets and the long-term issue of how / if Europe can / will pay off all of it's debt over time. The latter allowed the former, but I believe you can have resolution of the former without immediate definitive resolution of the latter.

As a layman, my very coarse and broad-brush analogy of what I think is going on:
- financial speculators see the fundamental weakness of the E. U. / Euro (currency union only, not the really needed fiscal union) and want to launch an attack on EU / Euro because it could be highly profitable to them
- the armies of the speculators and EU are lined up on battlefield, and both sides recognize that speculators have a distinct battlefield advantage right now
- so, EU members ask Germany, France, US, China, etc. for close air support so speculators army realize they will get annihilated if they attack and withdraw to fight another day
- Germany, France, U. S., etc. realize it is in their interest to help the EU defeat this speculative attack, but obviously they want something in return (e. g. China may want better trade terms with Europe and stronger role in IMF), and everyone wants to force EU members to put in place iron-clad reforms that will definitively deal with mountain of debt, over time).

So, like I said above, acute crisis in financial markets can be definitively resolved (say U. S. A10 Warthogs and AC130 gunships circling battlefield so it is obvious to speculators that they will get annihilated if they chose to attack) without fixing the underlying vulnerability (mountains and debt and unclear way to pay it off) right now.

But, at least now, they would have time to put in place an iron-clad plan that everyone credibly believes definitely resolves the underlying problem, over time...





edit: looks like I linked the wrong CNBC video clip about Sean Egan above. The correct video clip is here: http://video.cnbc.com/gallery/?video=3000056089

 

[Atreus21]

It has been discussed in the Stock Market and Greece threads, but I am not sure its has its own thread. Its quite obvious that the Eurozone experiment was a failure and needs to be abandoned. Currencies need to be able to raise and fall based on the weakness of the country. The Eurozone prevents that and rewards the strongest nations in the Eurozone because their currency is held down by the weakest.

Hey! Cool avatar. Good game.

 

[mshan]

As an aside, U. S. has to roll over 40% of it's debt in next two years, but unlike EU:

1) our government may have the ability to raise taxes without significantly damaging the economy, if need be
2) we have a Federal Reserve that can continue to print money, if need be
3) our economy is still growing, albeit not as fast as everyone would like (tax revenues are only 14% of GDP, where historically they have been 18%)

$4 Trillion dollars of real debt reduction (not fancy accounting and smoke and mirrors budget maneuveurs) may be credible minimum we will need to keep speculators from attacking us in future (?)

And despite political rhetoric about "entitlement reform", I think what Simpson and Bowles said in recent Bloomberg interview may be what real adult politicians (both Democrat and Republican) who are actually trying to govern and not just spew talking points know needs to be done, but like Greek government, don't want to own the unpopular hard choices that need to be made:

1) health care cost inflation (health care costs going up much faster than GDP and we still don't get better results than other countries that spend a lot less)
2) too much defense spending (I think they said we spend more than 14 other top spending on defense countries in world, combined)
3) closing tax loop holes so can lower rates and broaden base (I also remember hearing some comment somewhere else that taxes ultimately would still need to be raised on top 2% to really get our own long-term fiscal house in order...

 

[Miramonti]

"Italy is bust, it's just a matter of when"

 

[cubby1223]

What do you want people to say? The sky is falling? Its been falling for 3 years now and the only ones with any mojo left to do anything about it are the internationals who are about as cooperative, forgiving, and generous as a school of sharks. Do you just like dwelling endlessly on morbid subjects?

This is a thread about Italy, not OWS - try to keep up.

 

[Dulanic]

Good thing we're the hands of experienced capable strong leadership to guide us through. Oh darn, we got a community organizer instead. Doh!

That's right... save us NEIN NEIN NEIN!

 

[Moonbeam]

Good thing we're the hands of experienced capable strong leadership to guide us through. Oh darn, we got a community organizer instead. Doh!

Jesus was a community organizer. Why do you make fun of a talent vital for the survival of the human race. Don't answer. I know why. You were taught that you were disgusting as a child and put in a disgust box where you project your own self contempt out on the world at others because you remain emotionally stunted and never had a chance to grow up. I'm sorry that happened to you but my pity will do you no good. You need to withdraw from the world and meditate, talk a walk in the sun and feel the breeze. Turn off that radio and that TV. End any connection you have with negative culture that seeks to stoke your self hate to benefit somebody else's political plate. You have become a tool and it's not what God wanted for you. Don't be sad. You grew up in a dark part of the universe. The chance anybody around you knew anything were infinitesimal. You are not to blame. Good luck.

 

[Anarchist420]

our government may have the ability to raise taxes without significantly damaging the economy, if need be

I don't know that taxes can be raised without damaging the economy. That's more money taken out of the market and then spent into circulation causing prices to increases forcing people to borrow more. Slashing expenditures is the answer. The only way to raise more revenue would be a real estate tax and that still couldn't cover the deficit. Increasing the income tax via removing deductions and loopholes while reducing rates really isn't a good idea. The middle class needs more deductions.

U. S. has to roll over 40% of it's debt in next two years

What do you mean by that? Where did you hear that?

Also, there is no point in paying off debt via inflation because it makes everyone poorer and the creditors get next to nothing. It's best to pay maybe 1/2 of the public debt back via sale of Federal public lands and federal weapons, not pay back intragovernmental debt, and not pay the Federal reserve back for their purchase of securities.

 

[Spikesoldier]

i was told the fall of the roman empire began when they started to dilute the purity of gold in the coins they minted.

federal reserve printing moneys (QE1, QE2, proposed QE3) = i guess you can say that is similar to what the romans did when things got tight towards the end.

 

[mshan]

"U. S. has to roll over 40% of it's debt in next two years"

I heard some talking head on tv say that.

My impression of that statement would be that 40% of U. S. debt already being financed with existing Treasuries will come due in next two years, and new Treasuries to continue to finance that debt presumably has to be issued and then bought by investors at rates they find acceptable for risk they perceive to be taking (?)

 

[Jaskalas]

Do you just like dwelling endlessly on morbid subjects?

This 'morbid subject' is the complete collapse and fall of socialism. Of expansive governments that only exist by virtue of credit cards and debt. Of paying for lavish expenses of the present with promises in the future.

Greed is tearing down the major economies of the world. They were not built in a day, and we can see this crisis building and spiraling out of control. They will not fall in a day. Radical measures will be taken in an attempt to advert the inevitable, but just because it's not over doesn't mean it's not presently happening.

Do not dismiss something that takes '3 years'. Hell, it'll likely take longer. Does that mean it is not happening?

Should we ignore an economic collapse? That will not be possible. Modern society depends on the moving of goods and services. We might very well be talking about whether or not you have food. That might be of some concern to you I think.

 

[Ldir]

I will help since cubby will never call out a fellow hack.

Good thing we're the hands of experienced capable strong leadership to guide us through. Oh darn, we got a community organizer instead. Doh!

This is a thread about Italy, not Obama - try to keep up.

 

[piasabird]

Italy is like a giant pile of rubble left over from the Roman Empire and before that. Cant see what is so great about their economy, which is mostly just tourism.

 

[cwjerome]

What do you want people to say? The sky is falling? Its been falling for 3 years now and the only ones with any mojo left to do anything about it are the internationals who are about as cooperative, forgiving, and generous as a school of sharks. Do you just like dwelling endlessly on morbid subjects?

If you don't have the attention span then go away.

Hey, lets bash the Italians for next couple of months. Then, when things all work out and the disaster we (including myself) predicted would become 100% true, doesn't even occur - we move onto the next thing to build up and make a mountain out of a mole hill!!

Riiiiight... let's bash Italians and make mountains out of molehills. What's the deal with LeftWingNuts and their hyper sensitivity to the topic?

Italy is like a giant pile of rubble left over from the Roman Empire and before that. Cant see what is so great about their economy, which is mostly just tourism.

Not exactly... they have the 8th largest economy in the world and are among the the world's top manufacturing economies. Unlike Greece, it's a real economy, with seriously real implications for everyone if things go south bad.

I suppose some people may be spent on the whole Greece debacle, yet this situation -if it continues to grow- is on a different level. It's not so much about the failures/limitations with the EU, it's more about international economy, how majors powers conduct business, and the severe impact it could have on other nations.

 

[Fern]

IMO, the news about Italy is the worst we've seen in a while. I think it far worse than Greece.

Greece HAS defaulted. But Greece is relatively small. Italy, OTOH, has the world's third largest debt behind the USA and Japan. "Too big to fail, too big to save". It appear their external debt exceeds their GDP. This is a very bad sign couple with their recent poor economic news.

I think we may be moving towards a fustercluck that cannot be bailed out.

Fern

 

[Fern]

It has been discussed in the Stock Market and Greece threads, but I am not sure its has its own thread. Its quite obvious that the Eurozone experiment was a failure and needs to be abandoned. Currencies need to be able to raise and fall based on the weakness of the country. The Eurozone prevents that and rewards the strongest nations in the Eurozone because their currency is held down by the weakest.

I'm thinking that too.

But 'untangling' that is going to be b!tch, I'm afraid.

Fern

 

[Howard]

Italy is like a giant pile of rubble left over from the Roman Empire and before that. Cant see what is so great about their economy, which is mostly just tourism.

Italy has a large manufacturing sector...

 

[Fern]

As an aside, U. S. has to roll over 40% of it's debt in next two years, but unlike EU:

1) our government may have the ability to raise taxes without significantly damaging the economy, if need be

I don't think so.

2) we have a Federal Reserve that can continue to print money, if need be

Stagflation here we come?

3) our economy is still growing, albeit not as fast as everyone would like (tax revenues are only 14% of GDP, where historically they have been 18%)

Result of bad economy. Also govt spending to GDP is the highest it's been since WWII.

http://www.usgovernmentspending.com/us_20th_century_chart.html

$4 Trillion dollars of real debt reduction (not fancy accounting and smoke and mirrors budget maneuveurs) may be credible minimum we will need to keep speculators from attacking us in future (?)

I'm inclined to agree. However, I do not see it being tolerated unless forced upon us.

And despite political rhetoric about "entitlement reform", I think what Simpson and Bowles said in recent Bloomberg interview may be what real adult politicians (both Democrat and Republican) who are actually trying to govern and not just spew talking points know needs to be done, but like Greek government, don't want to own the unpopular hard choices that need to be made:

1) health care cost inflation (health care costs going up much faster than GDP and we still don't get better results than other countries that spend a lot less)
2) too much defense spending (I think they said we spend more than 14 other top spending on defense countries in world, combined)
3) closing tax loop holes so can lower rates and broaden base (I also remember hearing some comment somewhere else that taxes ultimately would still need to be raised on top 2% to really get our own long-term fiscal house in order...

1. I don't see where anyone in the govt, from either party, has anything to offer regarding HC costs. Other countries, those with single payer govt systems, are having the same problem.

2. Defense spending must come down, either voluntarily or it will be forced upon us by necessity.

3. The tax code needs to be revisited for a thorough re-write. It's been about 25 yrs and is, in great part, obsolete.

Raising taxes on the top 2% does not generate much revenue. According to the CBO, repealing the Bush tax cuts on the wealthiest would generate only $38 billion compared to our annual deficits in excess of $1 trillion. In the best of economic times it would rise to $98B IIRC. We'd still have a looong way to go.

Fern

 

[mshan]

Looks like I linked the wrong CNBC video clip of Sean Egan's comments this morning.

The correct link is: http://video.cnbc.com/gallery/?video=3000056089 (Clinton-esque moment comments)




Regarding his Italy and Spain comment, I believe he is referring to fact that French and German banks apparently have a lot of exposure to the sovereign debt of Italy and Spain and that is where some of the contagion risk is (this is what Rebecca Paterson of JP Morgan Chase said on Friday's Money in Motion episode on CNBC:

http://video.cnbc.com/gallery/?video=3000055467 (I would start viewing at 9 minute market, though her specific comments about Italy and Spain start around 12 minute mark).

 

[wuliheron]

Anyone seen Nero playing his fiddle?