Study finds bankers are a net economic drain, while hospital cleaners add positive value.

[Kasz216]

Alby_da_Wolf said:

Kasz216 said:

Alby_da_Wolf said:

Kasz216 said:

[...]

 

I don't see how bankers really fit into your countries problems.  Outside banks being stupid enough to lend your country money when it should of been forced to cut it's spending a decade ago.

Banks are going to do nothing but lose money in this Italy situation... and Italy will likely end up screwed either way... all thanks to the irresponsibility of the last Italian Prime Minister.

 

Italy's debt started growing without control with the centre-left wing governments during the '70s. The government under which the state's deficit grew the most had the current Prime Minister Mario Monti as one of the vice-ministers of the Balance (back then we hadn't a single Ministry of Economy, but three separate ones, Finance, Treasury and Balance), in three years the debt grew by more than 44%.

And the banks have a serious role, EU central bank doesn't lend directly to EU states like a true central bank, but through big private merchant banks, that obviously make the interest rate rise to get their profit. The conflict of interest is obvious, banks profit directly from speculation and indirectly thanks to increased interest rates on the money borrowed by the attacked states from BCE. Who devised that mechanism is either crazy or fool or a thug.

Either Italy banking works a LOT different then everywhere else... or your just mistaken with how governments get money lended to them.

Typically... and i'm pretty sure just... everywhere governments "borrow" money by issueing bonds.

Bond's are auctioned on, and therefore the interest is based on how credible your government is at paying it's debts back.

When Bond Yields go up like in the case... those who have already bought bonds (Like the banks) lose because they can't sell their bonds to other people without taking a loss.

 

Example.  Say I buy a 20 year $100 bond for $95.  That is a yield of 5%.  Now say bond yields shrink, to 3% tommorrow.   I can now sell my 100 bond for $97 to a private investor.

Made $3 and I didn't even have to wait 20 years.

 

Now if the yield rises to 10%.  I can only sell that bond for $90.  I'm going to lose money unless I hold on to it... and if the country is going to default.  Like Italy.  I'll be lucky to see $50!  (See Greece and the 50% haircuts.)

I very superficially know it, and since it entered the Euro Zone, Italy works like the other countries in it, nothing different. Before, it worked like any country in the world with a national central bank.

European Central Bank is currently criticized for not fully working like a central bank, like the Federal Reserve. It's also criticized for relying on American, instead of European, rating agencies, while the Federal Reserve relies on national, American rating agencies. It's criticized for lending the Euros it prints to banks at a low interest, but not directly to states at the same low interest. For having rules very abstract and far away from people's and enterprises' (except banks) needs. For following rules that are more suitable to French, German and Dutch economies and less to those of the other states (and not just Southern European ones, UK, Denmark and Sweden still refuse to enter the Eurozone, quite fearing it). For having played into speculators' hands, a thing that is held also against Mario Monti. And many other issues. BTW the experience of common people is that the strictness with which the Eurozone regulates official inflation doesn't match what happened in the real world, where with the sole exception of electronics and communications, prices skyrocketed after the adoption of the Euro.

http://en.wikipedia.org/wiki/European_Central_Bank

http://en.wikipedia.org/wiki/European_sovereign_debt_crisis

 

In that case... you don't know how any central bank works. 

First off.  Italy's central bank before the creation of the ECB worked was less what you call a "True Central Bank" then the Fed. 

Central banks NEVER loan money to governments.  They can't.

Central Banks are part of the government.  As an example, all the excess profits the US Federal Reserve makes (not a full federal bank mind you) goes to the US Treasury and Congress.  In a "Public" central bank.  This would be even more the case.

Additionally, by buying bond notes from banks, they are doing the governments a favor.  If the ECB paid out 100B to Italy.  Italy could pay out 100B in loans.  If the ECB buys 100B worth of bonds at a 30% yield.  Italy now owes them 130B, which the ECB will not collect.  Therefore reducing Italys debt burden by more.

The UK, Denmark and Sweeden stayed out of the eurozone because they realized that it's dumb to have one currency without one fiscal policy when your living with countries like Italy and Greece that run up huge deficits... and they don't want to be part of a stricter union.

Essentially your arguement isn't based on faulty opinions so much as a faulty premise to begin with.  Whoever has been telling you this stuff must of been making it up as they went along.  It reminds me of the Greek Protesters who think the politicians embezzled all their money.

 

Nothing in your wikipedia article actually backs up what you think it does.  For example under "Causes for the soverign debt crisis" the main cause they listed was countries like Italy and Greece using slick accounting tricks to hide the fact that they were spending more then their balance sheets said, and making less then they said.