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Summarizing Italy's Catastrophic Predicament In 15 Simple Bullet Points
The irony about the blow up over the past month in "all things Italian" is that the facts about its sovereign debt and viability profile have always been available for anyone to not only see, but make the conclusion that the situation is unsustainable. The fact that so few dared to do so only confirms that affirmative confirmation bias that dominates within 99% of the investing population. Sites such as Zero Hedge and others had been warning for over a year that the Italian "contagion" (which is a misnomer: Italy's lack of viability is perfectly-self contained: it does not need Greece or Portugal to blow up, and can do so perfectly well on its own, but the punditry certainly needs a scapegoat, in this case the incremental layering of "revelations" about how insolvent Europe is) and we have long presented primary source data confirming just how precarious the house of cards is not only in Italy but everywhere else too. Regardless, no matter how conventional wisdom got to the big picture revelation of just how ugly Italy's reality is (and don't think for a minute that Spain is any better) the truth is that the cat is not only out of the bag, but is widely rampaging through the china store (no pun intended), high on speed and methadone. So for everyone who still wishes to know why the Italian jobs is very much hopeless absent the ECB stepping in an bailout out the country, below is a succinct list of 15 bullet points courtesy of The Telegraph, which explains all there is to know about the country's current predicament. In retrospect we certainly can not blame Tremonti for wanting to get the hell out of there.
The truth about Italy:
- Morgan Stanley estimates net issuance should total 35 billion euros per year in 2012-2013, less than expect annual coupon payments of around €45 billion per year
- A total of €157 billion in Italian government paper will fall due by the end of the year. Redemptions will peak in September, when €46 billion of BTP CTX bonds mature
- Italy has raised €277.4 billion euros in debt so far in 2011, or 65.3% of its full-year target, the Treasury said - suggesting further issuance of €147.4 billion, according to Reuters calculations
- Italy's public debt stood at €1,890 billion at the end of April, according to Bank of Italy figures. The public debt figure includes postal savings
- Italian government bonds and short-term bills totaled €1,583 billion at the end of June according to Italian Treasury data. Their average term was 7.09 years
- A one percentage point increase in Italy's debt yields adds about €3 billion euros to interest payments in the first year, and twice that in the second, the Bank of Italy has said
- Italy forecast in April that 2011 debt servicing costs would total 4.8% of GDP, or about €77 billion
- The International Monetary Fund estimated in April that 47% of Italian 2010 government debt was held abroad. Morgan Stanley last week estimated foreign holdings at 44%
- Banks domiciled in Italy held €192 billion in Italian government securities at the end of May, Bank of Italy data showed last month. In the first quarter of 2011 they also held €589 billion euros in government securities on behalf of their clients
- European Banking Authority data showed in July that Italy's five lending retail banks had a net direct exposure to Italian sovereign debt of €159 billion. Intesa Sanpaolo is the most exposed with €57.6 billion, followed by UniCredit with €47.5 billion
- Morgan Stanley said domestic banks and insurance companies could quite easily buy net €60 billion a year in Italian government debt for the next few years
- JP Morgan analysis said Italian banks will have to refinance €53 billion of maturing bonds in wholesale markets next year
- The €600 billion Italian pension fund and insurance industry has increased its holdings of domestic government bonds by 10% in the last three years to 32% of assets, according to JP Morgan
- Analysts estimate that an increase in the average cost of Italian public debt drives a similar rise in the cost of banks' bond issues
- JP Morgan and Morgan Stanley analysts estimate Italian banks' holdings of government bonds at around 6% of their assets - a higher figure than 5% for Spanish banks and second only within the euro zone to Greek banks' 10%
Source: Telegraph
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bullet point 16:
* Jersey Shore season 4
more like 50,000 bullet points:
http://www.youtube.com/watch?v=GL09sLcKW4M&feature=player_detailpage
Sardonic sagacity. Well played sir.
Sardonic sagacity. Well played sir.
In 2011, they planned to issue debt of around 360B euros, which is $500B ??? Since their GDP is around $2T, this means that they planned issuance of 25% of their GDP. If this is true, they are fucked royally, and their debt/GDP ratio goes to moon, and they can join Greece on the beach.
Texted my son living in Italy to draw down as much cash as he could from his account at the local coop bank, both before and after midnight, just in case - with the low interest the banks pay on cash deposits it doesn't make any difference if you keep the money at home anyhow. Better safe then sorry...
What happens when you drive a Fiat into a brick wall?
#41
Never could figure out how to start mine. - Ned
Fuckin' Italian Atempt at Transportation!
Fix It Again Tony...
Loved 'em...Bambino 500 w/sunroof, 128 w/ sandbag in front (still went off the road twice in front wheel skids), then Alfas x 3..."itsa sleevas again" headgaskets galore!
and my Jeep Liberty engine blew at 48,000mi...I think it's me.
Merc. No more.
There may be a few who don't want to roll their IT-bills this fall. lulz
Additional bullet point:
Country has a history of suicidally backstabbing the only source of oil that its refineries can handle.
Of all the slanted views - this is the worst! Hey, so Italy is singlehandedly "suicidally backstabbing the only source of oil..." - hello? Who is having a small little bombing party in Africa?
Blood is in the water, the big boyz are circling the whale - TBTF Banks show their Killer Whale face. But it is not over. This is just the start and I'm not so sure as ZH about how it is going to end.
Those mountains of italian Debt are concentrated in Italy and France - the TBTF "reverse marketing" is a CDS operation which could just go the other way.
The truth is that the TBTF banks have received additional liquidity for their casino and they are betting on everything to just fix their balance sheets and build up their beloved bonuses. This is a sideshow which could just dry up. Wait for ZH articles about how the European Sovereigns "fight back with dirty, unfair and unconventional means". :-)
Additional "bullet point": Italy has a balanced budged and is mired for austerity - which is a "dirty word" for bankster, I know. Still, it's a good oldfashioned sign for a debtor.
Bank Run rumors are silly.
Everyone knows that banks are closed now in Italy.
Tomorrow is a holiday in Italy. The holy day of the debt free virgin or something.
Run little boys! The priest will have the day off.
Bank machines bitchez!
I dont know about a holiday, but there will be a few prayers said today for sure.
Methadrine would be preferable to Methadone if you were planning on rampage (or any kind of activity actually...)
ZERO HEDGE JUST RAN PROMINENTLY ACROSS NBC NIGHTLY OPENING!!!!!!
TD's PICK ON FULL VIEW!
ROCK STEADY,
BITCHEZ
Mr. Durden,
I'm not shittin you. At the opening of the NBC evening news, just now, they plastered your avatar right smack-dab in the middle of the screen for quite a bit. You just went big time, chief...or should we say that the old kings are tipping the hat to the new?
I salute you, my liege.
oh when the saints/
come marchin in/
oh when the saints come marchin in/
oh i want to be in that number/
when the saints come marchin in,
Janus
Why are you wasting your time watching NBC Nightly News?
sometimes i watch maury...you ARE the father, bitchez!
But i haven't had cable TV in over a decade; so i only see the rest when i'm on the road
when you make a study of humanity, it's important to take a fully-orbed view, my man.
PS, I like your name,, Careless Whisper -- cause Truth doesn't make a noise.
yanus-ZH went big-time a long time ago. Certainly before Ableson cited Tyler and gang in Barrons, that has a) a hell of a bigger audience and, (well. prrospectively) a more aware audience.
I guess you are among the 89 viewers ;-)
- Ned
{OT, I'm testing formatting <ol> this is a test </ol> end test.}
{{ed. didn't work, the fricken overstrke doesn't work for me, does show in the comment window, but not in the final my karma I guess}}
nvm
.
This is why Obama is running so many 2012 banners on ZH.
AWESOME!
word
i really do not want to share my hedge....if you were to fuckin stupid, and you know who you are, to follow the hedge when everything appeared rosy...please don't get on my bus now, ....i knew the day would come when the hedge became mainstream, and the tylers deserve everybit of admiration and financial rewards they get...but for us this is the worst thing that could happen...
You meant "too fucking stupid", stupid.
And is Tyler on teevee 'cause he and Graham know where to get $350/oz gold? Because allow me to give you some unsoliticted advice Ty - and let me qualify it by saying i am an avid follower of ZH - that these glitches and guest posts really do cheapen the cause.
But WTF do i know? I can't get me no $350/oz of gold and I ain't met no leprechauns either.
Here's the video (go to 2:10)
http://www.msnbc.msn.com/id/3032619/ns/nightly_news/#44026512
Limbaugh, who has 20 million listeners/wk, mentioned Zerohedge as "the" go-to economic site a while back and is a regular reader.
CONGRATS TO ZEROHEDGE
NBC Nightly News
did not mention by name but showed the Happy Birthday Mr. President headline along with Tylers Mug
++++
Ditto. Congratutions Tyler. It was hit & miss for me getting on your site today. How much do you need from each of us to upgrade your server? Not joking, give us a number. I'll send you my share.
Why anybody would watch television, especially network news, in 2011 is beyond my limited intelligence.
Tonight, I am taking my family to an outdoor production of Othello. The kids need to learn more about racism, lies, and murder.
Racism, lies and murder? Watch the politicians on TV, they are great at all three!
not that i'm not jealous...othello outdoors is othello outdoors, afterall.
but outdoors in the big H in august?
it's vital to watch; how else will we know what to deprogramm?
Have the kids read ZH they will learn just about everything they need to know
as for network television, it's flirting with the darkside, risky but necessary
TV is for suckers and sheep. Comcast, Direct TV and Dish or any of them will never get a nickel from me.
I watched the NBC/Comcast/GE/Al Waleed/Obama network video and they interview two Obama types in chicago. One a liberal white woman, the other was a fat young black man hipster. You two voted for the Hope and Change fvkkers.
Maria looks older and skankier than 87 year old Sophia Loren. She should get a gig on Jersey Shore with cookie or stookie or whatever.
I'd give you a few dollars for a dish... trying to build a solar cooker.
"Dark rams...and white Ewes". Will shoulda called 'em...Mudsharks.
That FUCKING RAWWWWKS!
I saw that headline and wondered if someone would stick that shit in the president's face.
Whooo-Ahh!
Hey, Ms--good to see you around these parts ;-) - Ned
Army Strong, MsCreant?
My husband was a low level spy in the service so I can't help it.
All I can say is hit the Donate Button, where else can you get news like this?????????? Pony Up you free loaders!
Settle down sparky. I know operating without a budget is the new Obamanomics norm. If Tyler needs X amount of money to upgrade, then we understand his expense needs and can donate accordingly.
Put up one of those fundraiser thermometer thingies and we'll blow the top off it in days!
You can't eat servers and you can probably dig 'em up for $5
How would you like your pension fund to be invested in Italian government bonds?
Stuck:
... invested in US Treasury Bonds..."
Fixed it for ya.
- Ned
The Euro is finally beginning to crash .......again, trading at around 1.406
Whatever had been hodling it up might be going away.
Also:
Bank of New York Mellon Corp told some of its biggest depositors this week it does not want their money.
http://www.reuters.com/article/2011/08/04/us-usa-banks-bny-idUSTRE7735JW...
Whatever had been holding it up?
The German GDP growth numbers of course. Germany actually still produces shit the world wants.
Most Americans can't afford a decent car but that's another story for another day.
Trade against the EUR at your own peril.
December call for EUR/USD 1.55 on QE3, $8 trillion additional debt and China's and Russia's commitment to trade all things Euro.
I vant teutonic goods but can't afford it - Germany needs to spend on its domestic fixed capital investments , soon it will have no export customers in Europe.
Time to donate to ZH. I can't live without it. Did very well playing the VIX and FAZ today. ZH must need to add more firepower servers ASAP. Please donate or click. These guys have been amazing for the last 3 years. Give up a little coin.
I'm long on pasta fazul
Any Italy is not Greece Tshirts? hmm?
I wonder if Brad Pitt will now send a cease and desist order for use of his image. Or maybe just a bill. Good Times... good times
there be no shelter here
I bet he's a fan. Any CnD will come from whatever stude produced FC.
"Tomorrow will be a key day. If the ECB and/or EFSF {or someone else} don't step up and do something before the European markets open, there is a fair chance that all hell will break loose at the open. If this is the case, I look for The Fed to step in {in some fashion} to help calm the markets"
http://themeanoldinvestor.blogspot.com/2011/08/black-thursday.html
Asian stocks are getting masacred.
What's funny is the series of IMF issues and pleas by IMF to Korea.
IMF: Board Confident Lagarde Can Effectively Carry Out Duties As IMF Chief
http://online.wsj.com/article/BT-CO-20110804-714929.html
South Korea buys gold for first time in 13 years
http://gata.org/node/10192
Korean economy shifted from recovery to expansion, but further tightening and rebalancing needed.
http://www.imf.org/external/mmedia/view.aspx?vid=1094390694001
IMF urges S. Korea to raise interest rates
http://www.reuters.com/article/2011/08/04/imf-skorea-idUSN1E7731ZT20110804
Largarde: If I was to write to my mother today, to say that I'm over my head.. she would be happy if she were alive.
FSB <<--- click for report:Peer Reveiw of Italy Jan 2011
Folks better either know, or better start learning......this collapse is going to change America...
http://www.youtube.com/watch?v=I4s0nzsU1Wg
+1000 for that tune...
Maybe Im paranoid but I think the collapse might wreck the whole world and send it back to the dark ages (and fuck me I dont have a castle on a hill or a suit of plate armor)... It won't only "change America"... We will see in the next days/weeks if this is the big one or if the kleptocracy can kick it down the road.
All eyes are going to be on Italy for now- I bet... But there are other things that can pull the old world down- over here in Poland it wont take much- If the Swiss Frank keeps appreciating against the Zloty there is going to be 700 thousand families out on the street- lotsa mortgages in swiss paper... If Fiat goes down with the ship and pulls back their plant here- 6000 jobless people in my town and the ones around it... Everywhere I look I see something just waiting to fall and burn because of the ripple effect from this shitstorm- and I bet its like that around the world... all of it is interconnected... Well hoorah for globalization!
Well Erick it could be worse. You could have Obama/Mugabe leading your country (to ruin). That is worse. A lot worse.
oh, make no mistake, HWjr is well prepped. he lives on @600 secluded acres about 80 miles south of here...four generators with over 250,000 gal fuel storage; and guns? bitchez, hank gots some guns. don't really need to store food round here, there's critters as far as the eye can see...and some of em's tasty
so don't ask me hank why do you drink/
to get drunk/
why do you roll smoke/
to get stoned/
why must you live out the songs that you wrote/
to get laid!/
Janus
italy is toast in the morning......
April 13, 2011: future structuring of Italy.
http://ec.europa.eu/europe2020/documents/documents-and-reports/countries/italia/index_en.htm
PRESS RELEASE 4 August 2011 - ECB announces details of refinancing operations with settlement in the period from 12 October 2011 to 17 January 2012Given the renewed tensions in some financial markets in the euro area, the Governing Council of the European Central Bank has today decided to conduct a liquidity-providing supplementary longer-term refinancing operation (LTRO) with a maturity of approximately six months. The operation will be conducted as a fixed rate tender procedure with full allotment. The rate in this operation will be fixed at the average rate of the main refinancing operations (MROs) over the life of the supplementary LTRO. The operation will be announced on 9 August 2011, with allotment on 10 August 2011 and settlement on 11 August 2011, and will mature on 1 March 2012.
The Governing Council also decided to continue conducting its MROs as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of the last maintenance period of 2011 on 17 January 2012. This procedure will also remain in use for the Eurosystem’s special-term refinancing operations with a maturity of one maintenance period, which will continue to be conducted for as long as needed, and at least until the end of the last quarter of 2011. The fixed rate in these special-term refinancing operations will be the same as the MRO rate prevailing at the time.
Furthermore, the Governing Council has decided to conduct the three-month LTROs to be allotted on 26 October, 30 November and 21 December 2011 as fixed rate tender procedures with full allotment. The rates in these three-month operations will be fixed at the average rate of the MROs over the life of the respective LTRO.
European Central BankDirectorate Communications
Press and Information Division
Kaiserstrasse 29, D-60311 Frankfurt am Main
Tel.: +49 69 1344 7455, Fax: +49 69 1344 7404
Internet: http://www.ecb.europa.eu
Reproduction is permitted provided that the source is acknowledged
http://www.ecb.int/press/pr/date/2011/html/pr110804_1.en.html
Isn't that too late? It's happening now, not in a month or so, and it won't work anyway. The hole is too big: Greece wrote a page about cronyism, Italia bella has a centuries old library.
Bullet #16
The more the ECB propounds to stabilize Italy, the deeper and quicker Italy sinks.
Bulllet #17
The Japanese, The korean, The swiss and the rest of the world are well trained by one Ben Bernanke in transitory policy response: My digipress versus your digipress and see whose digi is egregiously bigger and faster. So far, Bernanke 2 and the rest of the world: 1 and 1/2.
Bullet #18
No one takes seriously at Moodys', S&P, fitch, rat agencies. No one takes seriously at Congress for its ledgerdemain show in Con artist: The cut you saw is really not a cut, but a name of cut.
Bullet #19
The exponent function, or compounding, is the final destination VI of the US debt problem. The debt will always secure its payback, dead or alive.
EZ is falling apart, if yields on the 10yr Italian/spanish bonds hit 7%, you can 100% lock in that the EU/EZ will kick out Greece, which is sucking funds out of that bailout fund.
...which Greece will never pay back
which the greeks didn't want. Greece, you don't owe anyone a goddam thing; save, of course, the blood of your betters.
keep it safe for now, we want to spill it on wall street. there's got to be a symmetry to these things, don't you know.
'while the springtime turns slowly into autumn...'
janus
EZ meffeckngE
http://www.youtube.com/watch?v=btH4e0-WQAo
So now I get zee Prada and Maserati cheap, no?
No
If Italy and France are "pillars of your economic union" then you should be worried...
Well France and Italy have one thing.
They don't have Obama and an idiot populace who voted for him or a news media who fawns over him.
It makes me laugh to see you guys on the other side of the pond bashing away at EU misery. Granted its a cess pool. But nothing compares with the immense black hole of finance that is the US economy. So all this 'you'll fall first' ranting is sterile and irrelevant. The whole system will fall and the bigger you are the harder the fall!
Italy went through the Renaissance. They invented it. They'll survive the next melt down. Resilient people. Hope its true all over the world.
Why Speculators Should Sell Their Gold Now
Four Factors That Could Stall Gold’s Price Rise.....
http://seenoevilspeaknoevilhearnoevil.blogspot.com/2011/01/why-speculato...
OT: hilarious 2 min video.....
http://www.youtube.com/watch?v=W0Uju3tYS2s
HELLO Tokyo
and meanwhile from Zurich
Faber expect a 50 point snapback as market is extremely oversold
he smells qe3 which would mean even more upside but no new highs this year
Unfortunately, i do realize some may need to sell some gold and silver.
Fortunately, i had already raised an absolute shitload of frn's to trade for more..
Unfortunately, CNBW was looking like CNBS, right up until the time it went off the air.
Fortunately. i have zero hedge to rely on...
it is all theater...take a look at Patrick Byrne's www.deepcapture.com the movie to see that the market was flooded with bear stearns and lehman stock certificates 3 days before they went down,(FAIL TO DELIVER FTD) yet the SEC has no interest in stopping the thieving. The market run up last month, was just a little getting ready for the big slam. Just wait, a few months from now, we will see the magic of front running when the holy TOOSANCROSANCTTOFAIL banks somehow and magically "weather" this downturn...
Just like Lehman being a sacrificial lamb to save the bankrupt wallstreet toobigtofail brethren, this downturn is life blood for the frontrunning scum in the president's working group...just sayin.
My Lovely,
When I saw your Ikon...well, i guess you could say it was all bright-white light breaking through the clouded sky. or maybe like noah spotting his promise-dove over bleak-like seas...again, perhaps stout cortez surveying the lonely pacific sky at night and finding a brand new twinkly, lusterous sparkler invading his ken...i don't want to overstate the point or anything, but i've missed you.
toosancrosancttofail...and you callin janus the poet.
you know, i went back and read some of the stuff you've posted...and, shucks, i'd just be tellin you stuff you already know -- you're a smart one, Agrotera...and so I offer tribute of earth and water:
Earth -- my apologies. I lost something valuable you gave me; and i aim to get it back. I'll figure out some charming way of resecuring it, and then i'll put my infalible plan into action...you any good at ciphers?
Water -- http://www.youtube.com/watch?v=pte3Jg-2Ax4
Devotedly,
Janus
Wondering where you have been janus. So glad to hear your magic words again! No need for cousins to give offerings, remember? Yes, usually i am good at riddles, so here you go: my name with dot az @ you know where. So, give ur cuz a hollar any ole time! In the meantime, dear janus, show us the way with your bright light!
Thank you for the nice song!
Truly,
Agrotera
i think i've got it...let me know if you got my message. I've got lotsa stuff to tell you.
well, while i'm waiting on you to confirm receipt of my emil, janus will bless you will another song.
BTW, this band, Big Star, is a tragic story of almosts and bad timing and eventually drug abuse...all the same, they made some great music...oh, and this is of course incidental for folks like you and i (wink, wink), but they're from the Delta's queen city, Memphis, TN. without further ado, Stroke It Noel:
http://www.youtube.com/watch?v=jrXM7fKKlR0
keep an eye on the sky/
will they come/
oh the bombs/
do you wanna dance?/
easy now...,
Janus
the msm paying homage to tyler is not a good thing. it is like an invitation to the dark side with an appeal to ego. it is also an admission that the msm is losing the information war. if they can just get an acknowledgement from tyler they will be considered cool and if tyler would just tone down his rhetoric(truth telling) he might enjoy some of the wealth and privilege of the realm. the snake beckons with a surrogate offering the apple.
i maintain my thesis that germany will own vast parts of europe by the time the dust settles.
But it won't be worth much then if they do. There also won't be anyone left that can afford to buy that German car, except for a few Russian mafia types. Hello German unemployment.
they could form a new axis with russia and china to exchange assets for debt acting as the enforcer of of german style economics.
seriously, i cannot see germany passing up the opportunity to do something that secures the financial stability of the eurozone and therefore germany by doing an asset for debt swap.
how does the saying go, "in for a penny, in for a coupla trillion"
they do own a large part of europe; it's called europe, or eroica when i'm done with it.
their holdings stretch into the bospherous, too
in six words: Italy was given very cheap credit.
It was the only way to get them to buy all that cool German stuff.
Beer and their famous sense of humor I guess...
does this mean the colosseum is for sale now?
Have you noticed how the dominoes are falling in approximate order of their socialist/communist tendencies? How appropriate is that?
Have you noticed how the dominoes are falling in approximate order of their socialist/communist tendencies? How appropriate is that?
Simply Italy has more meat on bones to share between wolves.
Portugal does not have. And yes, it is not socialist tendencies but but irresponsibility on all levels.
Does Italy have a solvency or liquidity crisis, the latter argued by Credit Writedowns?
http://www.creditwritedowns.com/2011/08/euroscepticism.html
08-05 2:14: Credit Suisse's Garthwaite says ECB/EFSF must buy Italian and...
Banker panic imminent. One fool after another from these TBTF institutions are begging more of the same medicine that has made things WORSE since the onset of the crisis. With a big multiple.
/ES=1188. Tomorrow on CNBC, Lies-man will be masturbating while dreaming about QE3.
I don't know if anyone has given a look at how bis/imf data is calculated (I think they are used by MS as well).
In the case of Italy in the last 10/15 years we have had a flow of domestic funds from domestic mutual funds to foreign mutual funds usually managed by some foreign entity of an Italian bank. 15 years ago the ratio was 70% gdp in domestic and 15% abroad, now is 70% abroad and 15% domestic.
In my case a switched my bond part of the personal portfolio from some Italian btp and bunds to the equivalent etf on European gov. bonds (which is France based).
How bis/imf data treat this movement. It shows an increase in net foreign debt of Italy but not of France. Bis/imf consider the ownership of mutual funds/etf as equity ownership. At the same time, it consider the btp owned by the foreign based fund/etf as external debt. So what was a domestic debt become a foreign held debt.
To sum up, in the case of Italy, a foreign mutual fund owned by Italians that buys btp will be seen as:
- a foreign entity;
- the debt of Italy is seen as foreign held;
- the shares of the fund are seen as equity so they are not seen as debt of the country where the fund is domiciled.
I do not know how important this way of computing data is, but the effect is not negligible. Moreover, if you take in consideration the small country of Europe where there is no mutual fund industry, you will find that bis/imf data overstate foreign held debt (because all the citizen of the small country probably own the debt indirectly through some foreign mutual fund).
Finally the balance sheet of the ecb (not the consolidated one) is considered as it was all imputed to Germany (…eventually it will).
---
Here I paste the relevant passage of the bis/imf document describing their way of computing data:
http://www.imf.org/external/pubs/ft/eds/Eng/Guide/index.htm
Gross external debt is the amount, at any given time, of
disbursed and outstanding contractual liabilities of residents
of a country to nonresidents to repay principal,
with or without interest, or to pay interest, with or without
principal.
Residence
2.9 To qualify as external debt, the debt liabilities
must be owed by a resident to a nonresident. Residence
is determined by where the debtor and creditor
have their centers of economic interest—
typically, where they are ordinarily located—and not
by their nationality. The definition of residence is explained
in more detail later in this chapter and is the
same as in BPM5 and the 1993 SNA. Clarification of
the determination of residence for entities legally
incorporated or domiciled in “offshore centers” is
provided.
Residence5
2.13 Debt liabilities of residents that are owed to
nonresidents are to be included in the presentation of
an economy’s gross external debt position. Debt liabilities
owed to residents are excluded. Hence the definition
of residence is central to the definition of external
debt. In the Guide, as in the BPM5 and the 1993
SNA, an institutional unit—that is, an entity such as a
household, corporation, government agency, etc., that
is capable, in its own right, of owning assets, incurring
liabilities, and engaging in economic activities
and in transactions with other entities—is a resident
of an economy when it has its center of economic interest
in the economic territory of that country.
2.16 In essence, an institutional unit is a resident of
the economy in which it is ordinarily located. For instance,
a branch or subsidiary is resident in the economy
in which it is ordinarily located, because it engages
in economic activity and transactions from that
location, rather than necessarily the economy in
which its parent corporation is located. Unincorporated
site offices of major construction and similar
projects, such as oil and gas exploration, that take
over a year to complete and are carried out and managed
by nonresident enterprises will, in most instances,
meet the criteria of resident entities in the
economy in which they are located, and so can have
external debt (although the claims on the office by the
parent might well represent an equity investment).6
2.18 Similar issues can arise with “brass plate companies,”
“shell companies,” or “special purpose entities”
(SPEs). These entities may have little physical
presence in the economy in which they are legally incorporated
or legally domiciled (for example, registered
or licensed), and any substantive work of the
entity may be conducted in another economy. In such
circumstances, there might be debate about where the
center of economic interest for such entities lies. The
Guide attributes external debt to the economy in
which the entity, which has the liabilities on its balance
sheet, and so on whom the creditor has a claim,
is legally incorporated, or in the absence of legal incorporation,
is legally domiciled. So, debt issues on
the balance sheet of entities legally incorporated or
domiciled in an offshore center are to be classified as
external debt of the economy in which the offshore
center is located. Any subsequent on-lending of the
funds raised through such debt issues to a nonresident,
such as to a parent or subsidiary corporation, is
classified as an external asset of the offshore entity
and external debt of the borrowing entity.
2.21 A regional central bank is an international financial
organization that acts as a common central bank
for a group of member countries. Such a bank has its
headquarters in one country and usually maintains national
offices in each of the member countries. Each
national office acts as central bank for that country
and is treated as a resident institutional unit in that
country. The headquarters, however, is an international
organization, and thus a nonresident from the
perspective of the national central banks. However, for
statistics relating to the economic territory of the
whole group of member countries, the regional central
bank is a resident institutional unit of this territory.
3.19 Portfolio investment (Table 3.2) includes
traded securities (other than those included in direct
investment and reserve assets). These instruments
are usually traded (or tradable) in organized and
other financial markets, including over-the-counter
(OTC) markets. When they are owed to nonresidents,
of the portfolio investment components, debt
securities—that is, bonds and notes, and money market
instruments—are included in the gross external
debt position. Equity securities, including share investments
in mutual funds and investment trusts,4
are not included in the gross external debt position.
very helpful, thanks
"In retrospect we certainly can not blame Tremonti for wanting to get the hell out of there."
Or Geithner, for wanting to get out of here.
x
where do you go when you run...cos a bank run always out runs you. And you never know which bank will tank and run its stockings down to its ankles; like an old lady without underpanties. Naked is he that nobody can afford to hide or save from the running tide.
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