{"id":22461,"date":"2017-01-12T21:57:24","date_gmt":"2017-01-13T02:57:24","guid":{"rendered":"http:\/\/olduvai.ca\/?p=22461"},"modified":"2017-01-12T21:57:24","modified_gmt":"2017-01-13T02:57:24","slug":"the-italian-banking-crisis-no-free-lunch-or-is-there","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=22461","title":{"rendered":"The Italian Banking Crisis: No Free Lunch \u2013 Or Is There?"},"content":{"rendered":"

The Italian Banking Crisis: No Free Lunch \u2013 Or Is\u00a0There?<\/a><\/h3>\n
\n

It has been called \u201ca bigger risk than Brexit\u201d\u2013 the Italian banking crisis that could take down the eurozone. Handwringing officials say \u201cthere is no free lunch\u201d and \u201cno magic bullet.\u201d But UK Prof. Richard Werner says the magic bullet is just being ignored<\/em>.<\/em>\u00a0<\/em><\/p>\n

On December 4, 2016, Italian voters rejected a referendum to amend their constitution to give the government more power, and the Italian prime minister resigned. The resulting chaos has pushed Italy\u2019s already-troubled banks into bankruptcy. First on the chopping block is the 500 year old Banca Monte dei Paschi di Siena SpA (BMP), the oldest surviving bank in the world and the third largest bank in Italy. The concern is that its loss could trigger the collapse of other banks and even of the eurozone itself.<\/p>\n

There seems little doubt that BMP and other insolvent banks will be rescued. The biggest banks are always rescued, no matter how negligent or corrupt, because in our existing system, banks create the money we use in trade. Virtually the entire money supply is now created by banks when they make loans, as the\u00a0Bank of England has acknowledged<\/a>. When the banks collapse, economies collapse, because bank-created money is the grease that oils the wheels of production.<\/p>\n

So the Italian banks will no doubt be rescued. The question is, how?\u00a0<\/span>Normally, distressed banks can raise cash by selling their non-performing loans (NPLs) to other investors at a discount; but recovery on the mountain of Italian bad debts is so doubtful that foreign investors are unlikely to bite. In the past, bankrupt too-big-to-fail banks have sometimes been nationalized. That discourages \u201cmoral hazard\u201d \u2013 rewarding banks for bad behavior \u2013 but it\u2019s at the cost of imposing the bad debts on the government. Further, new EU rules require a \u201cbail in\u201d before a government bailout, something the Italian government is desperate to avoid.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Italian Banking Crisis: No Free Lunch \u2013 Or Is\u00a0There? It has been called \u201ca bigger risk than Brexit\u201d\u2013 the Italian banking crisis that could take down the eurozone. Handwringing officials say \u201cthere is no free lunch\u201d and \u201cno magic bullet.\u201d But UK Prof. Richard Werner says the magic bullet is just being ignored.\u00a0 On […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[61,2014,63,6716,1464,6559],"class_list":["post-22461","post","type-post","status-publish","format-standard","hentry","category-economics","tag-banking","tag-banking-crisis","tag-banks","tag-ellen-brown","tag-italy","tag-non-performing-loans"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/22461","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=22461"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/22461\/revisions"}],"predecessor-version":[{"id":22462,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/22461\/revisions\/22462"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=22461"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=22461"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=22461"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}