The point of no return

beppegrillo

In 2008, the States saved the banks from collapse, the very same banks that had caused the crisis. From that moment a world domino effect started. Since the world financial crisis that lasted a few months, the time needed to inject liquidity into the banks, there’s been the passage to the economic crisis with chain reactions. Closing down of the companies, mass sackings, drop in consumption, collapse in the value of the property market, reduction in the tax revenue.

To avoid collapse, the States have used the Public Debt. They have got the citizens into debt without their being aware (in the public imagination, the Public Debt is always someone else’s), first to keep the banks alive, then for current spending.

The effect of the increase in the Debt has been the increase in interest rate that the States have to pay to those who bought the newly issued bonds. The interest rates are blocking the development of the country. The more the interest on the Debt, the lower the capacity of the economic policy. The more the Debt rises, the more the cuts to the social State are the only possible solution.

If before the crisis, a State had a high Public Debt, it has had to get into debt beyond the point of no return. The question that everyone is asking is “When do you reach the point of no return?" It’s simple, when no one buys State bonds anymore. In the absence of buyers, the State has to declare itself bankrupt, it goes into default, it doesn’t pay the salaries of public employees and it doesn’t pay out pensions. Another question that has to be asked is: “Which States have the greatest probability of failing?” Once more the answer is simple in this case, the ones that had a big pre-crisis Public Debt and as well as a big increase in it post-crisis, have decreased their capacity to produce. They are producing less (the so-called GDP) and at the same time, they are increasing their Debt. In the EU, there are at least three States with these characteristics: Greece, Italy and Spain.

Greece and Italy have the same strategy in common, to sell their Debt to the States beyond the EU, in as much that the EU is not managing to satisfy the continual offers of “Tremorti” and of George Papandreou. Curiously, “Tremorti” sold our Debt to China last month and given that the Debt is ours and we don’t know the value of the sale. With the Debt, China has bought a part of our national sovereignty, perhaps Termini Imerese or privileged slides for foreign trade. However, even the Great China has its limits, and after digesting “Tremorti” it didn’t buy the 25 billion Euros of Greek bonds that were offered last week by Goldman Sachs.

At Davos, the people talking about the world economy are the same people that caused the biggest bubble of the last 150 years. There’s a question going around: “Which will collapse first, Italy or Greece?” The international investors have already given a technical response. The State Bonds of the countries at risk are covered by an insurance against their collapsing, called “CDS, Credit Default Swap”. Italy is in the top position, way ahead of the second in the table. Greece is only in fifth position. Into the catastrophe with optimism.

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