4 ms·

Italy's debt is almost 160 pct. of GDP and Italy's GDP stagnated over last 20 years. And budget deficit is very substantial (and will grow in comming recession)

by chewz 4y ago

Italy's debt is almost 160 pct. of GDP and Italy's GDP stagnated over last 20 years. And budget deficit is very substantial (and will grow in comming recession)... It means that Italy could afford to roll-over its debt only due to European Central Bank suppressing for years yields on Italian bonds. But now market yields go up as ECB is set to raise rates and withdraw QT. If Italy were to pay market rate on its debt it would bankrupt its budget. Most of Italy's revenues would go toward coupon payments of debt leaving very little for pensions, infrastructure, healthcare etc. So it is not about not repaying debt but about Italy's inability to roll it over in the markets. Single currency and single central bank in eurozone implies policy fragmentation - ECB has to address different issues at the same time. High inflation in the North and stalled growth with high yields in the South.

imtringued 4y ago
If Italy were to pay market rate on its debt it would be negative as the implementation of negative intereset rates on cash reenables the market mechanism of allowing a debtor choose how much he wants to be in debt. The 60% debt to GDP mandate of the eurozone could become obligatory and would result in all EU countries refusing to take on more debt, forcing the interest rate into deep negative territory.
guiriduro 4y ago
The only problem with debt and CB debt monetisation is what the debt is used for. If its used to keep pensioners solvent, social safety nets functioning, food on tables, education regardless of social class and general access to healthcare - then its absolutely fine by me (and most Europeans, I'd wager.) It should continue and increase, as necessary, especially if sovereign debt markets fail. The one policy that counts (and it affects north and south EU) is climate change. Debt, as a license to run dirty industry (public and private) and maintain fossil fuels, will need to be heavily reined back in those sectors as part of the quid pro quo for sovereign debt monetisation largesse. More europeans working shorter weeks, travelling less, but still enjoying social mobility and all the social needs from high spending countries (supported by ECB) is absolutely OK, just build a low carbon future - no more debt for dirty industries, or dirty imports. Smart, healthy people, backed by possibly heavily indebted countries supported by ECB in perpetuity, is frankly no problem.
- jdasdf 4y ago
  > If its used to keep pensioners solvent, social safety nets functioning, food on tables, education regardless of social class and general access to healthcare - then its absolutely fine by me So as long as its unsustainable it's "absolutely fine" by you? As long as its someone else paying for you, i guess its fine to fuck them over huh?
  - guiriduro 4y ago
    Who is paying for or fucking whom over? The only true unsustainable conditions are ones in the real world - broken environmental conditions, broken supportive social institutions; money is virtual and is just a tool (for measurement, standard for deferred payment blah) - money supply should be the servant, not the master of economic & social health. Anyway, arguably inflation will decrease debt value relative to inflated GDP, making it easier to pay down, as long as CBs step into sovereign debt markets to prevent runaway interest rates on existing debt.
    - jdasdf 4y ago
      >Who is paying for or fucking whom over? Future generations are the ones getting fucked over, because they are the ones who will have to pay for the subsidies you're wanting for your pet project. It's clear you haven't got a clue of the actual long term effects of your proposed policies. I recommend you read Basic Economics by Thomas Sowell, if only to understand that the policies you propose will have consequences.
      - guiriduro 4y ago
        So, a couple of trillion upfront for Europe's part of a decarbonised economic future, whose states have splurged on massive green economic infrastructure and managed to sustain social wellbeing in the interim, so the children of tomorrow breathe clean air, live in solar/wind powered clean houses, cheap and plentiful subsidised education and work in clean industries, at the cost of some temporary price increases and a higher tax rate down the line (maybe), is somehow worse than continuing toward environmental destruction, circling the wagons around private wealth (and lower tax)? Read some Marx, at least understand what alienation is.

by chewz 4y ago

imtringued 4y ago

If Italy were to pay market rate on its debt it would be negative as the implementation of negative intereset rates on cash reenables the market mechanism of allowing a debtor choose how much he wants to be in debt. The 60% debt to GDP mandate of the eurozone could become obligatory and would result in all EU countries refusing to take on more debt, forcing the interest rate into deep negative territory.

guiriduro 4y ago

The only problem with debt and CB debt monetisation is what the debt is used for. If its used to keep pensioners solvent, social safety nets functioning, food on tables, education regardless of social class and general access to healthcare - then its absolutely fine by me (and most Europeans, I'd wager.) It should continue and increase, as necessary, especially if sovereign debt markets fail. The one policy that counts (and it affects north and south EU) is climate change. Debt, as a license to run dirty industry (public and private) and maintain fossil fuels, will need to be heavily reined back in those sectors as part of the quid pro quo for sovereign debt monetisation largesse. More europeans working shorter weeks, travelling less, but still enjoying social mobility and all the social needs from high spending countries (supported by ECB) is absolutely OK, just build a low carbon future - no more debt for dirty industries, or dirty imports. Smart, healthy people, backed by possibly heavily indebted countries supported by ECB in perpetuity, is frankly no problem.

jdasdf 4y ago
> If its used to keep pensioners solvent, social safety nets functioning, food on tables, education regardless of social class and general access to healthcare - then its absolutely fine by me So as long as its unsustainable it's "absolutely fine" by you? As long as its someone else paying for you, i guess its fine to fuck them over huh?
- guiriduro 4y ago
  Who is paying for or fucking whom over? The only true unsustainable conditions are ones in the real world - broken environmental conditions, broken supportive social institutions; money is virtual and is just a tool (for measurement, standard for deferred payment blah) - money supply should be the servant, not the master of economic & social health. Anyway, arguably inflation will decrease debt value relative to inflated GDP, making it easier to pay down, as long as CBs step into sovereign debt markets to prevent runaway interest rates on existing debt.
  - jdasdf 4y ago
    >Who is paying for or fucking whom over? Future generations are the ones getting fucked over, because they are the ones who will have to pay for the subsidies you're wanting for your pet project. It's clear you haven't got a clue of the actual long term effects of your proposed policies. I recommend you read Basic Economics by Thomas Sowell, if only to understand that the policies you propose will have consequences.
    - guiriduro 4y ago
      So, a couple of trillion upfront for Europe's part of a decarbonised economic future, whose states have splurged on massive green economic infrastructure and managed to sustain social wellbeing in the interim, so the children of tomorrow breathe clean air, live in solar/wind powered clean houses, cheap and plentiful subsidised education and work in clean industries, at the cost of some temporary price increases and a higher tax rate down the line (maybe), is somehow worse than continuing toward environmental destruction, circling the wagons around private wealth (and lower tax)? Read some Marx, at least understand what alienation is.