Finance/Economics:
Almost all the developed nations have so much debt they can’t think about paying it back. They only worry about keeping up with the interest and refinancing costs. - Bill Bonner
Europe is already in a double dip recession and the sovereign debt crisis has already moved from Greece to Portugal to Ireland to Spain and now to Italy. Belgium, with its lack of a permanent government and 100% sovereign debt to GDP is next on this list. They would be followed by France and its implicit guarantee for a poorly capitalised banking system and Austria and its implicit guarantee for a banking system highly leveraged to central and eastern European debtors. Eventually, every country will feel the impact because a fixed exchange rate system with no lender of last resort is inherently unstable unless you have fiscal integration and/or compatibility. - Edward Harrison
The European project is failing at precisely the point that it had been attempting to solve — nationalism ..... Far from emerging as a unified force, the question will be how divided Europe will become. - Stratfor
Papandreou did not step down to “make way for the rescue package.” He stepped down to get out of the middle of a firefight. .. No one wants to be the “austerity candidate.” Politics is about dispensing goodies, not about taking them away. Papandreou clearly understands this reality and wants nothing to do with it. - Eric Fry
Only two countries have had lower growth then Italy since 2000 - Haiti and Zimbabwe! - Tyler Cowen
A 2007 PwC/World Bank report tried to estimate the total net tax burden on companies in different countries. Italy has a total net, real corporate tax rate of 68.6 percent, including constituent taxes such as stamp duties, chamber of commerce duties, real estate taxes, fuel taxes, and regional taxes, as well as the more traditional corporate taxes and taxes on the employment of labor. (NB: not all those taxes are enforced, or borne by the corporation, still it is a grim picture.) That’s the worst in all of Europe. - Tyler Cowen
The root of Italy's problems is that the country financed generous entitlements with high taxes and towering piles of debt, and now finds the money running out as the economy sputters. Indeed, Italy has more pensioners than workers and currently spends about 14 percent of GDP on pensions -- more than any other country in the Organization for Economic Cooperation and Development (OECD). - Foreign Policy
My suspicion is that the 120% debt target for Greece is largely a function of not wanting to suggest that Italy’s debt levels are too high. - Edward Harrison
Ever since the writings of Bagehot in the 19th century, it has usually been accepted that “last resort” market support should only occur when two key criteria are met. First, the borrower should face a liquidity problem, not a solvency problem, because otherwise the central bank would be propping up insolvent entities, and exposing itself to balance sheet losses. Second, to protect itself further against these possibilities, the central bank should only provide this emergency support in exchange for valid collateral. It is hard to argue that ECB purchases of Italian and Spanish sovereign bonds clearly meet these criteria. If this is a liquidity crisis, it is certainly one which could last for several years, and could all too easily morph into a solvency crisis. And, as Finland found when it asked for collateral from Greece, the provision of collateral is not an easy requirement to impose on an independent nation state. What could the ECB ask for in collateral? The Colosseum? - Gavyn Davies
The Germans have, twice in the last century, seen how this sort of monetary policy can end in hyperinflation and national bankruptcy. But how long can the Germans resist the pressure from other members? - Spiegel
And now another breach of confidence is on the horizon, with the Germans being expected to accept the notion that the ECB will be available to ailing euro countries as an almost unlimited reserve fund...The question the German government now faces is whether to preserve the monetary union or have a stable currency. - Spiegel
Is this kind of monetisation sustainable over the medium-term? 100%. If a central bank guarantees investors credibly that they can invest in certain debt instruments and not suffer principal or interest repayment risk, but only currency and inflation risk, some investors are almost definitely going to buy the debt instruments with the greatest yield pick up. Put another way, the only reason not to buy Italian debt at 2 or 300 basis points over Bunds, or Greek debt at 3 or 400 basis points over Bunds is because those governments are not credibly backstopped by the ECB. I should add that that is exactly why investors were in these bonds in the first place. It was only when the solvency issue came to a head that yields began to climb. - Edward Harrison
Here’s another interesting thing: in the 1990s, a number of countries, including Italy, engaged deliberately in transactions which had no economic justification, other than to mask their public debt levels in order to secure entry into the euro. Italy actively exploited ambiguity in accounting rules for swap transactions in order to mislead EU institutions, other EU national governments, and its own public as to the true size of its budget deficit. And Eurostat signed off on these transactions. And who worked at the Italian Treasury at that time? That’s right: “Super Mario” Draghi, who was director general of the Italian Treasury from 1991-2001 when all this was going on, and then joined Goldman Sachs (2002-2005), when the privatisations came up. Interesting that he is now the guy who has to deal with the ultimate fall-out. Karmic justice. - Marshall Auerback
Germany exiting the Eurozone would be less disruptive, than massive inflation scenarios in Greece, Portugal, and Spain. If France wants to stay in the Euro, let them. They can have the ECB as well. Then the ECB will print money to bail out the French banks - Mish
By openly acknowledging that Greece could abandon the Euro, Europe's leaders may have set in motion events that will automatically force Greece to leave - Michael Pettis
The significance of Ms. Merkel and Mr. Sarkozy's Cannes declaration is immense. At a stroke, they have introduced foreign-exchange risk into a sovereign-debt market still grappling with the realization that euro-zone government bonds contain unexpected credit risk. - Simon Nixon
The sell-off suggests Europe’s crisis is spiraling into a new stage as investors bet on which countries are most likely to quit the euro, starting with Greece. - Bloomberg
BNP Paribas SA and Commerzbank AG (CBK) are unloading sovereign bonds at a loss, leading European lenders in a government-debt flight that threatens to exacerbate the region’s crisis. BNP Paribas, France’s biggest bank, booked a loss of 812 million euros ($1 billion) in the past four months from reducing its holdings of European sovereign debt, while Commerzbank took losses as it cut its Greek, Irish, Italian, Portuguese and Spanish bonds by 22 percent to 13 billion euros this year. Banks are selling debt of southern European nations as investors punish companies with large holdings and regulators demand higher reserves to shoulder possible losses. The European Banking Authority is requiring lenders to boost capital by 106 billion euros after marking their government debt to market values. The trend may undermine European leaders’ efforts to lower borrowing costs for countries such as Greece and Italy, while generating larger writedowns and capital shortfalls. “European regulators and leaders are shooting themselves in the foot because a big investor group for sovereign bonds has been taken out of the market,” said Otto Dichtl, a London-based credit analyst for financial companies at Knight Capital Europe Ltd. “The downward spiral will continue until policy makers find a back-up solution for the sovereigns.” - Bloomberg
On US totals, if you figure average house prices use conforming loan balances, then a repeat buyer has to have roughly 10 percent down to buy in addition to the 6 percent Realtor fee to sell. Thus, the effective negative equity target would be 85%. You also have to factor in secondary financing, which most measures leave out. Based on that, over 50 percent of all mortgaged households in the US are effectively underwater — unable to sell for enough to pay a Realtor and put a down payment on a new purchase without coming out of pocket. Because repeat buyers have always carried the market as the foundation, this is why demand has not come back. It's as if half the potential buyers in America died over a two-year period of time. - Mark Hanson
Analysts’ forecasts show real-estate stocks will rally more than any other industry in China during the next year, even as wagers on declines climb to the highest level since at least 2008. Developers in the MSCI China Index will surge 46 percent on average by November 2012, the most among 21 groups in the equity gauge, based on analysts’ estimates compiled by Bloomberg. At the same time, bearish bets on property companies have doubled to 12 percent of shares available for trading this year, according to Data Explorers, a London-based research firm. Bulls say speculation about the bursting of an asset bubble in China’s property market is overblown and the shares are cheap after the average price-earnings ratio for the group fell 44 percent from an April peak to 5.77. Bears say real-estate stocks will extend this year’s slump after housing transactions in October fell for the first time in three months and government officials pledged to maintain real-estate curbs. - Bloomberg
The value of housing transactions in Hong Kong plunged 50 percent in October from the same month last year to HK$22.5 billion - Bloomberg
65% chance of banking crisis this month: Researchers - CNBC
Depression or great inflation in Europe? - Simon Johnson/New York Times
Contagion will overwhelm without policy response - Marc Chandler/Credit Writedowns
Why we will eventually see monetisation - Credit Writedowns
Does the ECB really have a silver bullet? - Gavyn Davies/Financial Times
Why the ECB might want to back Spain - The Economist
Will the PIIGS exit the Euro? - Mish
Italy's structural problems - Nick Squires/The Telegraph
If you thought Italy was bad... - Nils Pratley/The Guardian
Financial alchemy foils capital rules as banks redefine risk - Liam Vaughan/Bloomberg
Euro banks retreat into mini-crunch - The Guardian
Distortions in baffling bank financial statements - Floyd Norris/New York Times
US economy deeper in debt than before crisis - USA Today
Deja Vu all over again - Patrick Chovanec
China's gold imports surge sixfold - CNBC
Interactive guide to government debt - The Economist
Ray Dalio on how the economic machine works - Zero Hedge
UPA's perverse strategy - Niranjan Rajadhyaksha/Live Mint
Political/Social:
Only four countries (Afghanistan, Cambodia, Haiti, Myanmar and Pakistan) do worse than India in child mortality rate; only three have lower levels of “access to improved sanitation” (Bolivia, Cambodia and Haiti); and none (anywhere—not even in Africa) have a higher proportion of underweight children. Almost any composite index of these and related indicators of health, education and nutrition would place India very close to the bottom in a ranking of all countries outside Africa...There is probably no other example in the history of world development of an economy growing so fast for so long with such limited results in terms of broad-based social progress. - Jene Dreeze and Amartya Sen
Mobile phones could be health time bomb - Firstpost
By March 2012, UPA's options, electoral fortunes will shrink - Firstpost
