"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister

"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."

- Daenerys Targaryen

"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"

- Tyrion Lannister

"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

- Jorah Mormont

"These bad people are what I'm good at. Out talking them. Out thinking them."

- Tyrion Lannister

"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."

- Michael Barone

"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker

Monday, November 14, 2011

Eurozone slo-mo break-up
(or when push comes to shove)

Will the European Central Bank transform into the lender of last resort and backstop Italy to stop the crisis? This seems to me the only way it ends without more economic growth. What I see as happening is that Italy's new technocratic government will enact austerity measures that will slow growth, worsen Italy's budget picture and move Italy closer to default. They will not bring down rates. Lower rates would ameliorate the situation but that won't happen unless the ECB backstops Italy. But the ECB says that's not in its job-description. Will it do it when Greece defaults?

What happens when Greece defaults? Is that when push comes to shove and the ECB announces it will backstop Italy or does it continue to buy Italian bonds on the secondary market? Would simply buying bonds be enough to help Italy finance its debt?

What would help the situation would be economic growth. The ECB lowered its rate by .25 percent but that's not enough.

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