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Jasper commented on the blog post Not Just Italy: Mass Sell-off on Eurozone Bonds Yesterday
Italy has the ace in its hands. Just don’t rollover the debt. Default. Then you don’t pay 7 percent. That will bring the banks and Chinese and Arabs and whoever else bought these bonds to the table. As a store of value and a medium exchange none of this affects the Euro. Italy cannot print money – there is a good side as well as a bad side.
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Jasper commented on the blog post Not Just Italy: Mass Sell-off on Eurozone Bonds Yesterday
Caveat Emptor. Italy and Greece and Ireland have run into trouble because the people who brought their bonds, and who allowed them to issue them with impunity, believe that they are immune to credit risk. Someone has to come in and rescue them and prop up countries that sell bonds without the income stream to justify them. This is a sovereign problem not a Euro problem. These countries should be allowed to default and the bondholders need to take hair cuts. Think Argentina. Again the whole world is focussed on bailing out the buyers of bonds. The buyers of bonds should have assessed the risk of buying those bonds givne the politics and credit worthiness of the issuing countries. The world needs more moral hazard not less. We have seen that bailing out Wall Street – in terms of propping up the banks – has done nothing but encourage the banks to continue their parasitic ways. The same will happen here unless everyone form politicans to voters to investors is forced to get serious.
