And now, the answer…

… to my question from last week:

Can anyone explain to me how that’s not like a credit card company squeezing the hell out of a consumer? Or like an ordinary bank run? The logic is simple and elegant… even though they can afford to make the payments at the prevailing interest rates, they will have to accept higher interest rates because that would cause them problems.

And no one sees a problem with that kind of ridiculous thinking? No one sees a problem with clearly rampant speculation going on in Italian debt? Where the hell are the adults?

The adults would be the European Central Bank and apparently they’re being held back by… ze Germans:

The Head of Germany’s Bundesbank continues to object to monetary intervention by the ECB and, in particular, to enable the ECB to act as a lender of last resort. He also rejected the idea of the ECB capping interest rates for Euro Zone countries. All fine and great in theory Mr Weidmann, but complete nonsense in the rea world – there is no alternative. There is no Euro Zone institution that can intervene effectively, other than the ECB – forget the EFSF. If the ECB does not intervene and, in effect, implement QE, there will be NO EURO for the ECB to worry about, which will be seriously bad news for Germany.

Will someone please teach the Germans about financial/market issues – they really continue to be completely dogmatic, unrealistic and, in my humble opinion, completely stupid – much better to accept that its inevitable and try and work on measures to make sure individual countries meet their fiscal obligations, rather than keep bleating nein, nein, nein. Recently, Germany has had to U turn on virtually every occasion. A German friend of mine, may I add, agrees with my view that, in general, German’s are financially illiterate. However, interestingly, Mr Weidmann did not dismiss the idea of ECB rates falling below 1.0%, a position they have held in the past – at least he’s learnt one thing;

EVERY financial system in the world needs a lender of last resort, an entity that can step in as needed to provide liquidity during moments of stress and keep the wolves from devouring healthy institutions. Because of the way the Euro is set up, what is happening right now is a run on Italy. While it’s far from a picture of perfect fiscal health, it’s also not a basketcase. Austerity and enhanced tax collection can work there, though it will have to be done along with fiscal stimulus in Germany and France to really restart economic growth since it’s clear the rest of Europe won’t tolerate Italy running their own stimulus program. All of this means that Italy is salvageable, if only the ‘market’ will stop driving up it’s cost of borrowing based on speculation.

Ideally, a strong central bank could step in and provide the breathing room. But that will make the the Germans unhappy. If this continues, with German idiots effectively calling the shots, it will unravel the Euro and that most definitely won’t be good for Germany.

While they aren’t fiscally perfect, Italy ISN’T Greece. Greece deserves it’s fate, not because of overly generous benefits but because they have allowed systemic corruption and rampant tax evasion at every level of society… Greeks never apparently understood that someone has to pay the bills. Sounds a lot like the tea party here, no?

Italy isn’t nearly as bad. It’s worth saving and this ridiculous speculation has to stop somewhere. It’s time for the Europeans to step up and do what we did in 2008. This time, they can do it right and make sure they combine it with effective stimulus to get their economies moving again.

If only the Germans will stop acting, well, like Germans.

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