{"id":24256,"date":"2017-06-27T06:50:14","date_gmt":"2017-06-27T11:50:14","guid":{"rendered":"http:\/\/olduvai.ca\/?p=24256"},"modified":"2017-06-27T06:50:14","modified_gmt":"2017-06-27T11:50:14","slug":"italys-newest-bank-bailout-cost-as-much-as-its-annual-defense-budget","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=24256","title":{"rendered":"Italy\u2019s newest bank bailout cost as much as its annual defense budget"},"content":{"rendered":"
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Italy\u2019s newest bank bailout cost as much as its annual defense budget<\/a><\/h3>\n
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Two more Italian banks failed over the weekend\u2013 Banco Popolare di Vicenza and Veneto Banca.<\/p>\n

(In other news, the sky is blue.)<\/p>\n

The Italian Prime Minister himself stated that depositors\u2019 funds were at risk, so the government stepped in with a bailout and guarantee package that could cost taxpayers as much as 17 billion euros.<\/p>\n

That\u2019s a lot of money in Italy\u2013 around 1% of GDP. In fact it\u2019s basically as much as the 17.1 billion euros they spent on national defense last year (according to an estimate by Italian think tank IAI).<\/p>\n

You don\u2019t have to have a PhD in economics to figure out that NO government can afford to spend its entire defense budget every time a couple of medium-sized banks need a bailout.<\/p>\n

That goes especially for Italy, whose public debt level is already 132% of GDP\u2026 and rising. They simply don\u2019t have the money.<\/p>\n

Moreover, the European Union actually has a series of new rules collectively known as the \u201cBank Recovery and Resolution Directive\u201d which is supposed to prevent failing banks from being bailed out with taxpayer funds.<\/p>\n

Here\u2019s the thing\u2013 Italy has LOTS of banks that are on the ropes.<\/p>\n

So with taxpayer resources exhausted (and technically prohibited), who\u2019s going to be on the hook next time a bank goes under?<\/p>\n

Easy. By process of elimination, the only other party left to fleece is the depositor.<\/p>\n

Here\u2019s how it works:<\/p>\n

Let\u2019s say a bank takes in $1 billion in deposits.<\/p>\n

Naturally the bank doesn\u2019t just keep $1 billion in cash sitting in its vault. They invest the money. They make loans. They buy assets.<\/p>\n

So the bank\u2019s balance sheet shows $1 billion worth of assets, and $1 billion worth of deposits that they owe to their customers.<\/p>\n

But sometimes banks screw up when they invest their customers\u2019 funds. Loans go bad. Borrowers default.<\/p>\n

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

Italy\u2019s newest bank bailout cost as much as its annual defense budget Two more Italian banks failed over the weekend\u2013 Banco Popolare di Vicenza and Veneto Banca. (In other news, the sky is blue.) The Italian Prime Minister himself stated that depositors\u2019 funds were at risk, so the government stepped in with a bailout and […]<\/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":[15438,11066,63,1464,7312,7313,14135],"class_list":["post-24256","post","type-post","status-publish","format-standard","hentry","category-economics","tag-banco-popolare-di-vicenza","tag-bank-bailout","tag-banks","tag-italy","tag-simon-black","tag-sovereign-man","tag-veneto-banca"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/24256","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=24256"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/24256\/revisions"}],"predecessor-version":[{"id":24257,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/24256\/revisions\/24257"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=24256"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=24256"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=24256"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}