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Forget Three Months: Italy May Have Two Weeks Tops, As "It Already Is Where Spain Is Heading"

Tyler Durden's picture


Yesterday, Austrian finance minister Maria Fekter ruffled the unelected Italian PM's feather by saying "forget Spain, Italy is next in the bailout line" - a statement which as expected was promptly loudly refuted, mocked, and scorned by everyone possible: the type of reaction that only the truth can possibly generate in Europe. So far so good: after all the typical European reaction to any instance of the truth is loud screams of "lies, lies" and promptly sticking your head deep in the sand. However, this time around Italy may not have the benefit of the doubt, nor the benefit of some sacrificial replacement of a prime minister: Silvio is long gone, and at this point switching one banker figurehead with another will do precisely nothing. Which is why this morning's assessment from Bloomberg economist David Powell is spot on: "Italy would probably be forced into receiving a bailout if it were to face another two weeks like the last seven days." But the punchline: "The bad news for Italy is the country’s stock of debt is already as large as Spain’s may become after years of fiscal turmoil. In other words, Italy already is where Spain may be heading."

Surely Powell must be joking: has he not heard that Spain is not Uganda, and that there is "no risk" Spanish contagion will shift to Italy? Apparently not: which is actually what happens when one does the math and relies on facts instead of bluster, rhetoric and propaganda.

From Powell:

The seven-year sovereign yield has increased to 589 basis points from 538 basis points a week ago. That figure can be used as a proxy for the level with which the average cost of debt will eventually converge, as long as the current maturity profile is maintained, because the average age of the nation’s bonds is seven years.


The country would violate the IMF’s definition of solvency if its average cost of debt were to surpass 680 basis points. The fund defines debt as sustainable if the debt-to-GDP ratio starts to decline before the end of the forecast horizon. A rise to that level would push the ratio up to about 131 percent in 2016 and marginally higher the following year, according to Bloomberg Brief estimates. Those calculations use the projections of the IMF for growth, inflation and the primary budget deficit. If the average cost of debt were to remain at 5.89 percent - the present level of the seven-year yield - the debt-to-GDP ratio would peak in 2014 at126 percent. It would then decline to 124 percent by 2017.


The picture would deteriorate if the IMF’s economic growth forecast for this year were to prove too optimistic. It has estimated a contraction of 1.9 percent.


That looks like a best-case scenario. Output already declined 0.8 percent quarter over quarter during the first three months of the year.


The PMI data suggests the second quarter will be worse. The readings for the manufacturing sector were lower in April and May than they were at the start of the year. The figures for January, February and March came in at 46.8, 47.8 and 47.9, respectively. They were 43.8 and 44.8 for the following two months.

It gets worse...

The debt-to-GDP ratio already violates the proxy of national solvency derived from the research of Carmen Reinhart and Kenneth Rogoff. They have found sovereign debt becomes detrimental to economic growth, on average, when the ratio surpasses 90 percent.


The good news for Italy is the country has avoided a real estate bubble capable of bringing down the domestic banking system and the government has already closed the primary budget deficit. The major problem for Spain has been a recapitalization of the  nation’s lenders and several years of persistent budget deficits may push the country’s debt-to-GDP ratio toward the territory of insolvency.


...And much worse.

The bad news for Italy is the country’s stock of debt is already as large as Spain’s may become after years of fiscal turmoil. In other words, Italy already is where Spain may be heading.


A sharp rise of funding costs is capable of making the size of the liabilities of Italy start to look relatively as large as thoseof Greece.

And so the temporal bogey is set at +/- 14 days, as the bond market sets its sights on the exits in preempting the Nash equilibrium defection out of Italy.

Now, we look forward to blaring denials out of Italy that all of the math above is simply idiotic and that we should trust them, because all is fine. Also: Italy is not Somalia.


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Wed, 06/13/2012 - 08:09 | 2520875 LULZBank
LULZBank's picture

Is Italy Uganda then?

Wed, 06/13/2012 - 08:11 | 2520882 digitlman
digitlman's picture

Yes.  We all are.

Wed, 06/13/2012 - 08:23 | 2520911 ArgentoFisico
ArgentoFisico's picture

At least we still have an industry to restart from ...  and LooOOOoots of untraced wealth

Wed, 06/13/2012 - 08:25 | 2520920 falak pema
falak pema's picture

you must be a berlu boy or a vatican toy! 

Wed, 06/13/2012 - 08:28 | 2520926 ArgentoFisico
ArgentoFisico's picture

Water man... I hate both. Just trying to convince myself

Wed, 06/13/2012 - 08:34 | 2520949 Chief KnocAHoma
Chief KnocAHoma's picture

The suspense is killing me! This movie never ends! It is like the worst Friday the 13th film EVER! Only Bernanke and the CB whores of the World are Jason. So in this movie when once Jason gets killed, another pops up to... (Cue the scary music) .... PRINT MORE FUCKING MONEY TO BURRY YOU WITH! We all know where this going, but the slow starvation of humanity is cruel.

Just end it already... I'm getting bored.


Wed, 06/13/2012 - 08:36 | 2520954 GetZeeGold
GetZeeGold's picture



The suspense is killing me!


.....................hang on a second.


Wed, 06/13/2012 - 08:41 | 2520972 ArgentoFisico
ArgentoFisico's picture

"Just end it already... I'm getting bored."

Yeah, me too

Wed, 06/13/2012 - 09:07 | 2521091 Chris Jusset
Chris Jusset's picture

Italy's a gone dog.

Wed, 06/13/2012 - 08:43 | 2520977 Manthong
Manthong's picture

France is not Haiti.

Wed, 06/13/2012 - 08:45 | 2520984 Momauguin Joe
Momauguin Joe's picture

Give it some time.

Wed, 06/13/2012 - 09:12 | 2521110 AssFire
AssFire's picture

The private sector in Uganda is doing fine.

If the United States had a son- It would look like Uganda


Wed, 06/13/2012 - 10:07 | 2521403 HoofHearted
HoofHearted's picture

France is much worse-off than Haiti. France has a huge class of people all trying to suck off the (now nearly dry) government tit. Of course we saw the same in Haiti after the earthquake, so maybe they are the same...

Wed, 06/13/2012 - 09:08 | 2521101 obelisks
obelisks's picture

Chief just enjoy the performance because there will not be a re-run......

Wed, 06/13/2012 - 09:14 | 2521123 TheGardener
TheGardener's picture

But in every episode we say : They killed Kenny!

Wed, 06/13/2012 - 08:42 | 2520976 Shocker
Shocker's picture

Spain, Italy, Greece, everyone is in the same boat. If you haven't realized by now, then your not even trying to pay attention

We are global, that means one problem overseas will now affect everyone.

And at this current time, we are in shape to take another economic hit

Just a couple days, we have newspapers, HP, list goes on and on


Wed, 06/13/2012 - 08:53 | 2521014 GetZeeGold
GetZeeGold's picture



We are global, that means one problem overseas will now affect everyone.


I vote we just kick them off the they just did in Wisconsin and California. Shut the wallet and tell them to fuk off.


Wed, 06/13/2012 - 09:12 | 2521117 YuropeanImbecille
YuropeanImbecille's picture

I feel sorry for the Italians, the country is torn in two divided between north and south. The northern part is actually productive and proseperous while the south part (SURPRISE!) is a mafia ceespool shithole.


Wed, 06/13/2012 - 09:29 | 2521202 TheGardener
TheGardener's picture

When Argentina got bust, it had about half the salary level
and half the consumer prices of Italy at the time, so the effective living standard was about the same. But the former having better infrastructure and even better food !

And that was after the peso got pegged to dollar, making Argentina a no-go zone for Italian tourists lacking "hard" currency...

Wed, 06/13/2012 - 13:26 | 2522334 Harbanger
Harbanger's picture

You are wrong about every single point you tried to make.  You should take the time to learn the true financial history of Argentina beginning with Peron to the 2001 financial "bust" and their present government.  It's a textbook example of failed socialism.

Wed, 06/13/2012 - 14:55 | 2522774 TheGardener
TheGardener's picture

I lived there at the time and don`t get your point.

I did get a good lesson on decadence and how slow
this kind of retreating battle is being fought.

On ideology , I only got a glimpse of what a
soft national socialism alias peronism would
have meant for the world.

As it appears now , we all get some lesson on this soon.

Wed, 06/13/2012 - 10:24 | 2521544 Chaos_Theory
Chaos_Theory's picture

I talked with my family from Northeast Italy in the past about this.  They highly favored splitting Italy into two nations.  I made the near moronic comment that their Northern Italy (or Padania) would include Roma....that would be like telling ZH folks that D.C. is a positive!  No,their line to the south ended at Bologna/Ferrara. 

Recently, they note heavy increases in taxes, Indian immigrants who show up, bring in their relatives (automatic pensions for their parents and grandparents), and set up their own economies where they literally never interact with the existing stores, banks, and in effect avoid the VAT.  The family recently tried to withdraw about $5,000 Euro equivalent and the bank demanded they justify making a withdrawal above some .gov approved threshhold.  Yea, that's freedom for you....

Wed, 06/13/2012 - 13:44 | 2522425 Harbanger
Harbanger's picture

"They highly favored splitting Italy into two nations."  "No,their line to the south ended at Bologna/Ferrara."

Why, did the Italian Rennaissance begin North of Bologna/Ferrara? I didn't think so.

Thu, 06/14/2012 - 09:44 | 2525240 Chaos_Theory
Chaos_Theory's picture

I wasn't clear...their fictional new nation includes Bologna, Ferrara, Firenze, Rimini, Sienna, Perugia...basically a line from Ancona on the East to Perugia in the center to the southern boundary of Toscano.  That's pretty much the positive tax base.  Personally as a history buff, I think it would be sad for some rump state to not include Rome and the old city states of the Etruscans. 

Wed, 06/13/2012 - 08:27 | 2520922 Stoploss
Stoploss's picture

Where's the Borgias when you need them??

Wed, 06/13/2012 - 08:30 | 2520932 ArgentoFisico
ArgentoFisico's picture

Caiman Islands

Wed, 06/13/2012 - 09:09 | 2521102 littleguy
littleguy's picture


Wed, 06/13/2012 - 08:30 | 2520931 GMadScientist
GMadScientist's picture

No. Once again: Uganda can devalue if they need to do so. Italy: not so much.

Wed, 06/13/2012 - 08:31 | 2520936 ArgentoFisico
ArgentoFisico's picture

Exactly, Mad

Wed, 06/13/2012 - 09:05 | 2521081 francis_sawyer
francis_sawyer's picture

Well at least Italia has re-runs of 'Colpo Grosso' on TV, so they have that going for them... CIN CIN!

Wed, 06/13/2012 - 08:36 | 2520953 Nussi34
Nussi34's picture

Uganda is in much better shape than the ClubMed! Maybe they have less than 8 weeks of vacation per year in Uganda?

Wed, 06/13/2012 - 08:47 | 2520990 Chief_Illiniwek
Chief_Illiniwek's picture

What is this fascination with insulting Uganda?

Wed, 06/13/2012 - 09:02 | 2521060 francis_sawyer
francis_sawyer's picture

Started with Zimbabwe... We're working backwards thru the alphabet (skipping over anything with "United" in it for convenience purposes)...

Wed, 06/13/2012 - 11:06 | 2521797 Vegamma
Vegamma's picture

Well played, sir.

Wed, 06/13/2012 - 09:09 | 2521106 TeMpTeK
Wed, 06/13/2012 - 09:09 | 2521109 GOSPLAN HERO
GOSPLAN HERO's picture

Washington, D.C. is Kenya.

Wed, 06/13/2012 - 08:11 | 2520881 maxmad
maxmad's picture

Its over before the fireworks on the 4th!

Wed, 06/13/2012 - 08:14 | 2520885 pepperspray
pepperspray's picture

Throw in a Venetian tornado and the party's just starting.

Wed, 06/13/2012 - 08:24 | 2520915 ArgentoFisico
ArgentoFisico's picture

And earthquakes... party's already started

Wed, 06/13/2012 - 08:15 | 2520888 chinaguy
chinaguy's picture
French Industry Minister: France is in an “economic emergency situation”
  • French economy is hardly growing
  • 900 plants closed over 3 years
  • Studying potential new govt support to auto sector
  • Will prepare bill to prevent “abusive” layoffs (like fcuk off, you’re fired!!)
  • To present bill encouraging cap to executive pay in private sector this fall
  • Austerity in Europe would lead to recession
  • Need to boost growth like in US
Wed, 06/13/2012 - 08:36 | 2520958 ATM
ATM's picture

Exactly... forget Italy already it is France that really matters and they are fucked. The Germans are actually broke too because what they own is a mirage. 

Wed, 06/13/2012 - 08:37 | 2520961 carbon
carbon's picture

looks like the EURO is a

mickey mouse currency
Wed, 06/13/2012 - 09:32 | 2521236 unrulian
unrulian's picture

poor reference...Mickey Mouse is real

Wed, 06/13/2012 - 10:25 | 2521550 JOYFUL
JOYFUL's picture

+101 last, a commentator with the wit n willies to say it like it is!

 Mickey(Cohen?!?) Donald(Trump!?!), n the rest of the Disney gang overcame the limitations of their celluloid beginnings to reach the pinnacle of achievement in the market economy of kapitalist Euro-merika...whilst the (formerly) actual inhabitants of said map space have retreated into the margins of a cartoon-like opus scripted by insane deviants bent upon draining every ounce of real blood n treasure from the wandering crowds of onlookers who believe that they have paid an entrance fee to a fun park but have actually given themselves over to be come citizens of a new post reality prison facility of gigantic proportions....


Disneyland exists in order to hide that it is the "real" country, all of "real" America that is Disneyland (a bit like prisons are there to hide that it is the social in its entirety, in its banal omnipresence, that is carceral).

Disneyland is presented as imaginary in order to make us believe that the rest is real, whereas all of Los Angeles and the America that surrounds it are no longer real, but belong to the hyperreal order and to theorder of simulation. It is no longer a question of a false representation of reality(ideology) but of concealing the fact that the real is no longer real, and thus of saving the reality principle.

 - Disneyland: a space of the regeneration of the imaginary as waste-treatment plants are elsewhere, and even here. Everywhere today one must recycle waste, and the dreams, the phantasms, the historical, fairylike, legendary imaginary of children and adults is a waste
product, the first great toxic excrement of a hyperreal civilization. On a mental level, Disneyland is the prototype of this new function. But all the sexual, psychic, somatic recycling institutes, which proliferate in California, belong to the same order.

-People no longer look at each other, but there are institutes for that. They no longer touch each other, but there is contactotherapy. They no longer walk, but they go jogging, etc. Everywhere one recycles lost faculties, or lost bodies, or lost sociality, or the lost taste for food. One reinvents penury, asceticism, vanished savage naturalness: natural food, health food, yoga. Marshall Sahlins's idea that it is the economy of the market, and not of nature at all, that secretes penury, is verified, but at a secondary level: here, in the sophisticated confines of a triumphal market economy is reinvented a penury/sign, a penury/simulacrum, a simulated behavior of the underdeveloped (including the adoptionof Marxist tenets) that, in the guise of ecology, of energy crises and the critique of capital, adds a final esoteric aureole to the triumph of an esoteric culture... Baudrillard\Simulacra&Simulation

Wed, 06/13/2012 - 08:17 | 2520892 Dezperado
Dezperado's picture

A bailout is supposed to have money. Where is it?

Wed, 06/13/2012 - 08:22 | 2520905 LULZBank
LULZBank's picture

If theres' actual money involved than its a loan with a hard collateral.

Bailouts is FREE MONEEZ!!!

Wed, 06/13/2012 - 08:30 | 2520930 disabledvet
disabledvet's picture

First and only rule of bailouts! "you better have the phucking money." and of course the Tylers' Durden claim outrageous amounts that don't exist. that's because this is STILL a Marshal Plan in reverse. As it ALWAYS has been in Europe. Now why Is the entirety of the media such euro-philes again? Methinks "it all begins with the hunt for yield...

Wed, 06/13/2012 - 08:30 | 2520933 GMadScientist
GMadScientist's picture


It's gone!

Wed, 06/13/2012 - 09:47 | 2521314 TheGardener
TheGardener's picture

It`s easy, Nobel price winning Stiglitz explained it to us:
the government lends it to the banks and the banks lend it to the government.

He calls it Voodoo-economics and invalidated my prejudices against Nobel prices as contra indicators.

Wed, 06/13/2012 - 10:24 | 2521543 GCT
GCT's picture

The Vatican will bail out Italy!

Wed, 06/13/2012 - 08:19 | 2520895 Miss Expectations
Miss Expectations's picture

Years ago when I was traveling around Italy, I had gotten very sick and ended up in the hospital in Bologna.  The doctor asked where I'd been traveling and if I'd been to Africa.  I said no, I'd been in southern Italy.  He said, "Same thing."

Wed, 06/13/2012 - 08:25 | 2520919 fiercekitty
fiercekitty's picture


Wed, 06/13/2012 - 08:33 | 2520943 ArgentoFisico
ArgentoFisico's picture

Man! I'm from Bologna! Well, yes, it's kind of 2 different countries, that's true.

Wed, 06/13/2012 - 09:33 | 2521241 unrulian
unrulian's picture

You're full of it

Wed, 06/13/2012 - 08:40 | 2520970 ATM
ATM's picture

I spent 10 days in Sicily then traveled north up the boot. One of the drivers I had asked where I had been and how I liked the country. I said Sicily and I enjoyed it very much.

He responded, " Sicily, she is no Italy!" 

I love Sicily.

Wed, 06/13/2012 - 08:56 | 2521034 Raymond K Hessel
Raymond K Hessel's picture


Sicily is to Italy what Ireland is to England

Wed, 06/13/2012 - 09:45 | 2521306 Miss Expectations
Miss Expectations's picture

My husband is Sicilian.  None of the Italian ladies in his New Jersey neighborhood could understand his grandmother's dialect.  (I am commenting again primarily for those who junked me...Also, I loved Southern Italy.)

Wed, 06/13/2012 - 08:20 | 2520900 Martial
Martial's picture

Batman towels. Batman towels is the answer.  I don't know what they were thinking with Spiderman.

Wed, 06/13/2012 - 08:31 | 2520938 GMadScientist
GMadScientist's picture

We'll save the 'Avengers' towels for the core countries.

Wed, 06/13/2012 - 09:21 | 2521165 wildsilver
wildsilver's picture

I see the need for superpowers but suggest something with more absorbency.

A bath robe ... with a cape, might do it.

Wed, 06/13/2012 - 08:20 | 2520901 cardis
cardis's picture

+-14days? must run...

Wed, 06/13/2012 - 08:21 | 2520903 DrDinkus
DrDinkus's picture

But when does Ben CTRL+P?! How bad do things have to get...cant decide if I stick it out or dump PMs now and buy back before he fires up the printing press...

Wed, 06/13/2012 - 08:27 | 2520923 Terminus C
Terminus C's picture

You seem to be referring to paper...  GLD /= gold

Wed, 06/13/2012 - 08:32 | 2520940 disabledvet
disabledvet's picture

Which is why Ben is hitting the "Control G" button now.

Wed, 06/13/2012 - 08:38 | 2520963 Terminus C
Terminus C's picture

I need a 'control G" button...

Wed, 06/13/2012 - 08:24 | 2520906 falak pema
falak pema's picture

Reagan, Clinton & GWB achieved one thing : they put the whole of the globe on the same footing in NWO construct and outsourcing; we're all sheeple and there are no exceptions; unless you be part of the .01% running the world and their surrogates of the next level, the 1%.

True feudal times and I want my wine very dry and faintly acidic. The taste of vanilla zest, the whiff of evanescent scent of pepper n nuts, feels like heaven when you are in hell...I'll try remember that! 

Wed, 06/13/2012 - 08:27 | 2520924 GeneMarchbanks
GeneMarchbanks's picture

Perhaps. Even so none of it would have been possible without sycophants and a weaponized idiot mob of religious news-watchers. Sycophants like... like... BHL.

Ah, France.

Wed, 06/13/2012 - 08:37 | 2520959 GMadScientist
GMadScientist's picture

You'll get a whiff of evanescent scent of "nuts" alright.

Wed, 06/13/2012 - 08:22 | 2520909 lolmao500
lolmao500's picture

The Vatican will save Italy!

Wed, 06/13/2012 - 08:23 | 2520910 fiercekitty
fiercekitty's picture

The "Jersey Shore" cast needs to go back to Italy.  :P

Wed, 06/13/2012 - 08:36 | 2520950 ArgentoFisico
ArgentoFisico's picture

No, PLEASE! Dont' add bullshit to an already terrible situation! Ok, with troika and everything ... but that would be TOO bad

Wed, 06/13/2012 - 08:38 | 2520965 GMadScientist
GMadScientist's picture

The property damage alone should provide a minor "stimulus". ;)

Wed, 06/13/2012 - 08:41 | 2520974 fiercekitty
fiercekitty's picture

I know.... I loved it when the Italian crowds turned on those idiots when they went to the clubs.  I was just being sarcastic/silly.  Haha.

Wed, 06/13/2012 - 08:43 | 2520978 LULZBank
LULZBank's picture

How about Desperate Housewives?

Wed, 06/13/2012 - 08:24 | 2520913 Catullus
Catullus's picture

When Spanish 10 years hit 7%, the focus shifts to Italy.

Wed, 06/13/2012 - 08:36 | 2520956 disabledvet
disabledvet's picture

When interest rates in Italy hit 7% you mean. This article is a total lie. The Italian deficit is one of the worst in the world. Pricing it in Euro's doomed the currency. Now Italy will go bankrupt...not Spain. "mother of all capital raisings" going on right now.

Wed, 06/13/2012 - 10:24 | 2521535 TheGardener
TheGardener's picture

If Draghula were Spanish he would have thrown Italy under the bus first. The dollar is done but the pet project of
a European Union dreamed up by American imperialists more
then a century ago (could bore you with original quotes from that time) is to be sacrificed before and Europeans at each others throat has always been good entertainment.

It was hard to be a doomster all those years while the ones
dismissing the called off thunderstorm tripled their money.
My seemingly helpless call, that they could only fool us
as long as they are scheming together, at last gets some merit.

Wed, 06/13/2012 - 08:25 | 2520916 Terminus C
Terminus C's picture

I love how they forecast Italy's debt to gdp ratio going down in the future.  That made me laugh.

Wed, 06/13/2012 - 10:29 | 2521568 TheGardener
TheGardener's picture

Make msm report on the gdp to debt ratio instead and no one will notice ...

Wed, 06/13/2012 - 08:25 | 2520917 rsnoble
rsnoble's picture

Now don't forget the main headlines in the US in last couple of months:

1. Bernanke: "I won't let the EU crisis affect the US".

2. Goldman Sucks: "Now is the best time in a generation to buy stocks".

Conclusion based on outcomes of similar comments in the past: We're fucked.

Wed, 06/13/2012 - 08:35 | 2520948 N. B. Forrest
N. B. Forrest's picture

But the good Lord can get the Irish out of this but the rest of the world...


See Braveheart clip

Wed, 06/13/2012 - 09:41 | 2521291 my puppy for prez
my puppy for prez's picture

Thanks for that!  Greatest movie ever...

Wed, 06/13/2012 - 08:25 | 2520918 ZeroAvatar
ZeroAvatar's picture

Aaaaaaaaaand, cue the 'Bailout Fairy'. 


I want a bailout.  Where's MY bailout?  Should I put an I.O.U. under my pillow?


Italy IS NOT California.......oh wait........

Wed, 06/13/2012 - 09:44 | 2521302 DOT
DOT's picture

Just in from Cupertino !  Apple will start offering the new i-$ at parity !  California, the US and Europe are saved !

Wed, 06/13/2012 - 08:28 | 2520928 valley chick
valley chick's picture

But the punchline: "The bad news for Italy is the country’s stock of debt is already as large as Spain’s may become after years of fiscal turmoil. In other words, Italy already is where Spain may be heading."


Been waiting for this.... :)  Bring it on!

Wed, 06/13/2012 - 08:31 | 2520937 Cursive
Cursive's picture

Is there any developed country that hasn't violated Reinhart and Rogoff's solvency threshold of 90% debt/gdp?

Wed, 06/13/2012 - 08:36 | 2520952 N. B. Forrest
N. B. Forrest's picture

Canada, Singapore and a few others.

Wed, 06/13/2012 - 09:23 | 2521180 semperfi
semperfi's picture

ummm, Mars ?

Wed, 06/13/2012 - 08:40 | 2520969 GMadScientist
GMadScientist's picture


Wed, 06/13/2012 - 08:46 | 2520986 GeneMarchbanks
GeneMarchbanks's picture

Only because of semantics, private, public, whateva.

What else ya got?

Wed, 06/13/2012 - 08:51 | 2521008 GMadScientist
GMadScientist's picture

That's not semantics.

A private housing bubble can pop without everyone in Australia being put on the hook for it (whether or not this will actually occur is a matter of Australian national politics, pride, and average intelligence, but it is an option available to them). Public debt, on the other hand, will get passed down to their grandkids.

Big difference.


Wed, 06/13/2012 - 09:06 | 2521085 GeneMarchbanks
GeneMarchbanks's picture

No difference, you're delusional. Real income in Australia isn't keeping up with the housing bubble, not even close.

Pure casino you're living in. The debt will get backstopped publicly no questions asked just as it was created.

Cute chart though.

Wed, 06/13/2012 - 10:46 | 2521683 TheGardener
TheGardener's picture

Aussie dollars are commodity dollars and as such known for big swings. Once you and your products are commoditized you ride with the storms of the markets. Aussie being a surfers paradise should have no problems riding any wave and get all
the cream off the crest.

Real estate is another story , it kind of moon landed
on Australia.

Wed, 06/13/2012 - 08:32 | 2520939 youngman
youngman's picture

" when one does the math and relies on facts"....the facts are hard to come buy.....I don´t trust the banks numbers let alone the governments numbers...and as the water rises in the life boat...the numbers will be is sad to watch this...but it is all deserved.. 

Wed, 06/13/2012 - 08:32 | 2520942 Debugas
Debugas's picture

all the countries were borrowing under condition that they will never have to return the capital body of the credits only the interest

Wed, 06/13/2012 - 11:20 | 2521867 TheGardener
TheGardener's picture

...only the interest, in kind...

So with olives, tomatoes , gone off cheese leveraged 1:10000
as a means of exchange , there is still some good plunk wine
to go towards northerners instead of pensions they already have forfeited without knowing or consciously contemplating.

Merkel is a genius and a saint, all she can possibly save
for her fellow aging Germans is some cheap booze and head
her socialist union party who never ever rouse above just that.

Wed, 06/13/2012 - 08:33 | 2520944 DUNTHAT
DUNTHAT's picture

Sooner or later the "solvency monkey" will hit Japan ...

Then my friends, it will be the ole USA's turn...

Wed, 06/13/2012 - 08:34 | 2520945 MFL8240
MFL8240's picture

Another bailout from countries that have no money and lent to a countrrys that cannot pay it back.  This is laughable!

Wed, 06/13/2012 - 08:34 | 2520946 fonzannoon
fonzannoon's picture

I have to admit I had completely missed all the Uganda talk up until very recently

Wed, 06/13/2012 - 08:36 | 2520955 Me_Myself_and_I
Me_Myself_and_I's picture

These dumb economics projections are the instruments of the devil.  At least of incompetent politicians and their banker-economists lackeys.

Rising debt levels mean increased servicing costs.  The increased debt service costs are an Opportunity Cost for government spending elsewhere that would actually stimulate/grow GDP.

Displacement of that spending reduces GDP growth, which exacerbates the Debt : GDP ratios policymakers at the national and international levels claim to hold dear. 

Say debt goes from 1 to 1.1 units.. they act as if GDP will remain constant (say, 1), instead of falling to 0.95 or 0.90 due to displaced spending on interest.

Running faster and faster to stay in place, even the Red Queen eventually falls flat on the treadmill.

Wed, 06/13/2012 - 10:31 | 2521580 sschu
sschu's picture

government spending elsewhere that would actually stimulate/grow GDP.

You may want to think about this a bit.  

In most country's circumstance, government spending is deficit spending and they have reached debt saturation, so additional debt will not will not cause GDP to grow.

When it comes to GDP, government spending needs to be out of the equation otherwise the numbers are seriously distorted.


Wed, 06/13/2012 - 08:36 | 2520957 maulikhpatel
maulikhpatel's picture

Portugal, Italy, Greece and Spain (PIGS nation) are busy playing Football...All the people in their country are busy watching football matches and enjoying...Rest of the world is busy watching the crisis in the Euro Zone and worried about finances to the PIGS Nation...This is THE difference between lender and borrower..

Wed, 06/13/2012 - 08:38 | 2520964 ArgentoFisico
ArgentoFisico's picture

Oro e Argento bitchez!

Wed, 06/13/2012 - 08:44 | 2520981 fiercekitty
fiercekitty's picture


Wed, 06/13/2012 - 11:43 | 2521954 TheGardener
TheGardener's picture

Accordo , puttana !

Wed, 06/13/2012 - 08:39 | 2520966 paulie
paulie's picture

Italy is not Somalia ..... but it wishes it were at this point

Wed, 06/13/2012 - 08:59 | 2521050 Raymond Reason
Raymond Reason's picture

Well, exactly.  Uganda and Somalia are the wet dreams of Spain and Italy.  There are many battles in the ongoing struggle of Govt against oppression and suppression by the People, but when the war is won, you have Uganda and Somalia. Total victory. 

Wed, 06/13/2012 - 08:41 | 2520975 Turin Turambar
Turin Turambar's picture

So are we all Ugandans now, or will we all head to Zimbabwe, so we can use those ultra cool trillion dollar notes?

Wed, 06/13/2012 - 08:46 | 2520991 Gandalf6900
Gandalf6900's picture

you don't to go to zimbabwe, just bring back the Lira

Wed, 06/13/2012 - 11:54 | 2522002 TheGardener
TheGardener's picture

Ugandan shades and South Rhodesian trillion dollar suits
makes this discussion look cool.

Man in black , don`t mind alien bankers.

Wed, 06/13/2012 - 08:50 | 2521002 JackT
JackT's picture

Looking to the future, can we assume that the Euro-state-dominos are a template for United States?  Will the United States experience the same type of domino collapse or will it be more like a game of poker whereby one just folds?

Wed, 06/13/2012 - 09:19 | 2521149 N. B. Forrest
N. B. Forrest's picture

Eventually the United States of America will fall like the United States of Europe.  However, never underestimate the creativity of bureaucrats in trying to keep their jobs.  They may suck at everything else, but as far as keeping their jobs they are fuckin' geniuses.


It will take longer than we all could want or imagine. 

Wed, 06/13/2012 - 08:51 | 2521011 tuttisaluti
tuttisaluti's picture

I thik this talk about Europ is a big media bubble and will soon pop. Then the US$ get beaten badly and so the GPB

Wed, 06/13/2012 - 08:52 | 2521016 TrainWreck1
TrainWreck1's picture

The answer to this problem is clear: We need continuous, real-time bailouts for the world.

Cashdumps on demand. Not months, milliseconds. Maybe some sort of algorithm...

Wed, 06/13/2012 - 08:55 | 2521030 Winston Churchill
Winston Churchill's picture

Time to roll out the Spiderman duvet sets and matching curtains.

The time between dominos is getting shorter and shorter.

France in 6 weeks at this rate.

Wed, 06/13/2012 - 09:41 | 2521269 spanish inquisition
spanish inquisition's picture

"You can always count on Americans to do the right thing - after they've tried everything else." -Winston Churchill (love that quote)

Start doing your vocal exercises for a sustained "USA! USA!USA!" chant. I do think the US has a lot of hypothetical crap to still try, so we may be waiting to chant for a while. Such as the paper order reconfirmation is not for printing US money, the CIA just wants a jump on counterfitting Drachmas. That way their economy can be crushed for years if they leave the Euro and others will be too scared to strike out on their own. So you see there is a lot of everything else that can be done before the US will do the right thing..

A clue we are close to doing the right thing will be when we get actual US Fed confirmation of Otter's speech phase in American Graffiti - I think that this situation absolutely requires a really futile and stupid gesture be done on somebody's part.

Wed, 06/13/2012 - 11:24 | 2521880 WillyGroper
WillyGroper's picture


Wed, 06/13/2012 - 08:58 | 2521048 ghostzapper
ghostzapper's picture

Long macaroni CDS and short macaroni bonds equals free money, huh?  seems like it but that damn ECB is lurking in the corner prolly why the yields have not yet eclipsed the highs from October.  or is the market that dumb?

Wed, 06/13/2012 - 08:59 | 2521051 EmileLargo
EmileLargo's picture

I don't understand what the big deal is. Get the defaults over with and get on with life. The world won't come to an end with sovereign defaults. They happen all the time. Read "This time is different" by Reinhart and Rogoff. The only thing that is amazing about modern times is that anyone thinks sovereign defaults are a rare thing. Nothing could be further from the truth.

Wed, 06/13/2012 - 09:01 | 2521063 sabra1
sabra1's picture

nothing like getting it up Euranus!

Wed, 06/13/2012 - 09:04 | 2521079 LULZBank
LULZBank's picture

When will Europeans start pointing fingers? "Its Greece who started it!"

Wed, 06/13/2012 - 09:07 | 2521095 tu-ne-cede-malis
tu-ne-cede-malis's picture

Jim Sinclair over at Jsmineset counters Soros' 3 month claim with 3 weeks.  I think he's right.  And we're already through week 1.

Wed, 06/13/2012 - 09:09 | 2521103 gaoptimize
gaoptimize's picture

This chart is bogus because of the GDP growth assumptions apparently built into it.  I've seen this often from the CBO too.  Let's stop dividing our projections with other less accurate projections.

Wed, 06/13/2012 - 09:11 | 2521113 obelisks
obelisks's picture

i used be able to buy so much real estate just with monopoly money

and now they wont accept this euro shit

Wed, 06/13/2012 - 09:11 | 2521115 lolmao500
lolmao500's picture

The good news for Italy is the country has avoided a real estate bubble capable of bringing down the domestic banking system and the government has already closed the primary budget deficit.

This is pretty good... But still, if the bond speculators kick out Italy out of the bond market, the facts won't matter... So yeah, Italy, if the bond market wasn't going crazy, could get away with their current state of affairs... hell it's much worse in the US and the US has been getting away with it...

So if the insanity continues, Italy will be forced to get loans from the ECB... but if the bond market returns to normal real soon, Italy would be alright... but eh, that won't happen since Greece, Spain and Ireland are going down...

Wed, 06/13/2012 - 09:16 | 2521138 Mister Ponzi
Mister Ponzi's picture

The speed of rate rises in Italy hasn't really decreased today. The seven-year yield is currently seven points higher at 5.96%.

Wed, 06/13/2012 - 09:35 | 2521255 Mister Ponzi
Mister Ponzi's picture

+12 bp at 6.01% and rapidly increasing.

Wed, 06/13/2012 - 09:18 | 2521145 yogibear
yogibear's picture

Pony-up on your Euro union bet Germany. The PIIGS need more of your wealth Germany. The PIIGS can just keep coming back to the bailout trough for more.

Spain, Italy, Ireland and Portugal can keep holding their hands out. Just threaten to blow up the Euro.

Bernanke will also contribute US money through the IMF. PIIGS you have all the suckers lined up to pay. Just keep taking. 

Wed, 06/13/2012 - 09:19 | 2521150 DOT
DOT's picture

If Italy is "next" I think we can take them out on the 19th when we have a new moon. No problems on the 20th.

Wed, 06/13/2012 - 09:39 | 2521282 mm17101978
mm17101978's picture

Italy does have a real-estate bubble in major cities but for some reason no MSM outlet is saying that. Prices are horribly high in major cities, much higher than Spain's at the peak, and very few houses get sold at this time in the biggest cities. However, if the euro tanks (hopefully going to parity against the USD sometime after the first few days in August, which would give me time to put 100% of my hard-earned savings into physical gold) one can always ask a specialized company to transport the PMs he/she owns into a stable country (on that front, Italy is lucky as far as which countries it shares borders with). Italy's four major banks (Intesa, MPS, Unicredit and BNL) are toast and so is BNP (owner of BNL) so the only hope left for this country's banking system are closely-held banks (there are a few owned by families close to the Vatican) or cooperative banks (mostly owned by their shareholders). Anyhow, I do believe that at the end of 2012 the price of Gold in Euros, the EURUSD exchange rate and the shape of Italy's crucial figures (CDS, bond yields, spreads with Bunds) will be much different (negatively, except for the gold price hopefully).

Wed, 06/13/2012 - 10:04 | 2521389 alt-shift-x
alt-shift-x's picture

"Now, we look forward to blaring denials out of Italy that all of the math above is simply idiotic and that we should trust them, because all is fine. Also: Italy is not Somalia."

wait no longer ...

for those of you that do not understand german, allow me to translate: "all of the math is simply idiotic, trust us, everything is fine. Italy is not Somalia"


Wed, 06/13/2012 - 11:00 | 2521765 Alpacanio
Alpacanio's picture

But... Kudlow said, the Bernank has a trillion and half will go to the Euro to help save the day!

Wed, 06/13/2012 - 13:50 | 2522453 Bobportlandor
Bobportlandor's picture

Since this is so bianently obvious then there has to be a motive. I believe it is to give each country time to print up money and prepare to leave the euro union.

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