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Italian Economic Crisis Points To Eurozone Implosion

November 10th, 2011

Not long after my last post warned how near Italy was to passing the 7 percent yield on its ten year government bonds, the dire red line has been passed. It should be pointed out that the crisis in Italy is not only based on market reaction to its horrid politics; the Italian economy is coming apart at the seams, with business bankruptcies proliferating amidst a demographic contraction that makes future economic growth in a time of austerity highly implausible.

Now that Italian bonds with ten year maturities are above 7 percent in yields, the Eurozone is reeling  and global markets are swooning, after experiencing a maddening series of rallies based entirely on false hopes predicated on statements from hopelessly inept politicians.

Now, except for the most gullible, the consensus among economists who even previously expressed optimism about a global economic recovery is that the Eurozone is likely headed to some form of break-up. If Americans are laughing at their comrades across the Atlantic, they shouldn’t be. The economic and fiscal tragedy unwinding in Europe is a harbinger of what soon lies in wait for the United States, which has the mother of all fiscal imbalances.

                 

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