Italian Bonds

[dealmaker]

Italian Bonds

A selloff of Italian bonds was the result of the country's new budget, which promises to triple Italy's targeted deficit. The budget puts the populist/far-right Italian government on a collision course with the European Commission, which is trying to avoid a debt crisis in the Eurozone. The Italian government wants the cash to fund public infrastructure, tax cuts, and welfare increases. Reuters

 

[nooby_mcnoob]

Dalio called this a few months/years ago. He's had a large short position on the Italian banks. My guess is that he is either unwinding that or perhaps his debt crisis template is unfolding as expected in that area.

 

[JSOP]

Italian Bonds

A selloff of Italian bonds was the result of the country's new budget, which promises to triple Italy's targeted deficit. The budget puts the populist/far-right Italian government on a collision course with the European Commission, which is trying to avoid a debt crisis in the Eurozone. The Italian government wants the cash to fund public infrastructure, tax cuts, and welfare increases. Reuters

Well if they expect Italy to be at the forefront taking in all those migrants that adds nothing to productivity or cultural value then EU is gonna have to pay up to Italy to have the money to house those migrants unless they don't mind Italy sending all those migrants to the rest of EU countries. Otherwise don't be surprised Italy becomes the next Greece.

 

[dealmaker]

Italy is the world's 3rd largest bond market

 

[JSOP]

Dalio called this a few months/years ago. He's had a large short position on the Italian banks. My guess is that he is either unwinding that or perhaps his debt crisis template is unfolding as expected in that area.

As long as EU is not injecting money into Italy, Italian bonds are doomed. Dalio could've kept the bonds a bit longer.

 

[pipeguy]

Italian Bonds

A selloff of Italian bonds was the result of the country's new budget, which promises to triple Italy's targeted deficit. The budget puts the populist/far-right Italian government on a collision course with the European Commission, which is trying to avoid a debt crisis in the Eurozone. The Italian government wants the cash to fund public infrastructure, tax cuts, and welfare increases. Reuters

Italian crisis is like waves, ebbs and flows. I think this carousel is for traders making money on euro ripping off weak hands

 

[piezoe]

The problem for all the EU monetary zone countries, including eventually Germany, is that although they have a common currency, they don;'t have true monetary union. They lack a common bond. Soros said it best when he said two years ago, in Frankfurt, that Germany should either agree to the Eurobond or leave the EU.

There are two salient observations here: 1. All the Euro zone countries must agree to both a common currency and a common bond, and 2., If Great Britain wants to stay in the EU, they must agree to a true monetary union -- the Euro and the Eurobond. Otherwise they must go their own way and suffer the consequences. The way of the modern world is globalization; not selfish nationalist interests. It is as unstoppable as the rotation of the planets.

 

[dealmaker]

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https://twitter.com/x/status/1047084707744309248

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[pipeguy]

The problem for all the EU monetary zone countries, including eventually Germany, is that although they have a common currency, they don;'t have true monetary union. They lack a common bond. Soros said it best when he said two years ago, in Frankfurt, that Germany should either agree to the Eurobond or leave the EU.

There are two salient observations here: 1. All the Euro zone countries must agree to both a common currency and a common bond, and 2., If Great Britain wants to stay in the EU, they must agree to a true monetary union -- the Euro and the Eurobond. Otherwise they must go their own way and suffer the consequences. The way of the modern world is globalization; not selfish nationalist interests. It is as unstoppable as the rotation of the planets.

Yeah common debt is a great idea, but poor members will then make the Germany as sinking boat, because common bond implies Eurozone risks (growth, fiscal sustainability etc.)

 

[piezoe]

Yeah common debt is a great idea, but poor members will then make the Germany as sinking boat, because common bond implies Eurozone risks (growth, fiscal sustainability etc.)

That is of course the concern, but practical experience tells us it is an unfounded concern. Germany will do better still with a common bond as will all the eurozone countries. Does Alberta or British Columbia do worse because there is a Quebec. Do Connecticut and California do any worse because there is a Mississippi an Alabama and a Louisiana?

There is a common misconception that federal bonds are used to raise money for deficit spending. Under a strict gold standard this is true. However it is not true under fiat currency that is backed by productivity rather than a hard commodity. Those countries that use a fiat currency do not have to borrow to spend! And in fact, in general, they don't. Although some countries do have statutory laws requiring bond issuance to match deficit expenditure, this is entirely unnecessary in a fiat money regime. In a fiat money regime, Bonds serve two main purposes: 1. They are a temporary interest bearing replacement for money that serve to allow temporarily unneeded stores of money to remain constant in buying power; 2. they are an essential tool of the central bank in managing reserve accounts -- this is true even in countries without a specific reserve requirement, such as Canada and Australia. Bonds held on the Central Banks Balance sheet represent money that is available for commerce. Bonds held in the private sector represent money that is temporarily unavailable for commerce.

Bonds allow central banks to regulate the amount of money available for commerce and thus hold that amount in line with productivity and population growth, which in a fiat money regime becomes a necessity to prevent undue inflation or deflation. Of course we are accustomed to thinking of the central banks as indirectly controlling money by controlling the wholesale price of money, e.g., in the U.S.,the Fed funds rate. This is the main tool used by central banks under a gold standard or in a fiat regime. Bond trading by the Fed is intimately tied to this mechanism. When the central bank has only one bond to buy and sell their job is made infinitely easier and more flexible than when there is no common bond behind the currency, as is the case in the current Euro zone. The ECB is handicapped and their job made more difficult because the EU lacks a common bond. Mario Draghi has done well considering how difficult his task is without a common bond. It would be made infinitely easier had he a common bond to work with.