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Loretta Napoleoni," junk bonds and debt, we are the next Greece




Loretta Napoleoni is World famous Italian economist, what explained how financing Islamic terrorism. If you have a quarter of an hour, his ascoltatevi Ted Talk about how and why he started to deal with terrorism, an economist (at the time of the BR). Loretta Napoleoni

lives and works in London, and I Sorry to notice once again, the great Italian intellectuals now are all abroad. I reprint here his interview on City, which warns of debt, and explains a couple of tricks that caste is not used to let us know what we are being evil. Click on images to enlarge them, below is the text of the interview.

economist and expert on terrorism, Loretta Napoleoni worked as a consultant to governments and international organizations. Now sounds the alarm for the Italian public debt.

The world economy is now beginning to recover from the subprime crisis, the so-called "securities spazzatura” che hanno messo in ginocchio la finanza globale. Lei sostiene invece che in Italia quei titoli continuano ad aumentare. Com’è possibile?
Negli Stati Uniti le banche avevano permesso ai privati di indebitarsi oltre la possibilità di ripagare i prestiti. In Italia le banche lo permettono agli enti pubblici, con la complicità del governo.
Sarebbe?
Le faccio l’esempio delle Asl, che nella maggior parte dei casi sono in rosso. In Campania sono talmente senza soldi che non riescono a pagare neppure le fatture di due anni prima. Invece di cercare di risparmiare, sono andate dalle banche d’affari.
Per fare cosa?
In pratica la banca dice alla Asl: you have to pay these bills for the next two years? Well I buy them I'll give you the money immediately, and could send forth some later sell bonds on the exchange.
is the same mechanism of subprime U.S. mortgages, right?
Yes, except that here, as the local health authorities are linked to the State, the debt it guarantees Economy Minister Giulio Tremonti. Even if you could. So the "red" ASL is sold to banks, which then resell it to people as if it were a State debt (so safely, with low interest rates) and if people buy it without knowing anything. Many of these bonds end up in pension funds.
In fact, they are very
risky ... Yes! And so they should give a much higher interest! We are selling the debts of an entity that can not even pay the bills for two years before. In finance this is called "dead father".
"Father dead, why?
Why you sell your father's legacy before he dies: not knowing if and when you have ...
Be ', but there is guaranteed by the State.
But it can not be! Only the Treasury and the regions with special status can issue bonds. Not institutions. In addition the local health authorities within the state budget, but financial autonomy and property. The Minister of Economy covers all this, though, because otherwise they stop all regions. There is no money to make it go forward.
Are you sure? It seems incredible.
course. It is not the only way to pull out money that are not there. Another thing they do often make it appear the debt is lower than what it is.
How it works?
takes off from the state budget a portion of the debt swap, which means change. Here, too, need the help of the big investment banks: when the debt is too high, the bank exchange it with a more delayed. This means that the budget appears solo il nuovo debito, che è più basso di quello vecchio, perché è più diluito.
Ma scusi, anche se è diluito, il debito rimane lo stesso, perché dura di più nel tempo…
Non solo rimane lo stesso, ma aumenta: il tasso di interesse si abbassa per i primi tre anni, per esempio, e poi aumenta molto per quelli successivi. Ma siccome il bilancio è solo una fotografia delle entrate e delle uscite in un dato momento, il debito sembra più basso.
Prima o poi però quei soldi lo Stato dovrà pagarli.
Esatto. Però allo scadere dei tre anni loro che fanno? Un altro swap. E quindi spingono continuamente verso il futuro la data in cui dovranno pagare much more. Obviously this "more" increases every time you riallunga payment. This makes the state, but so do the regions and provinces.
And how does all this stand? How did the subprime
: it is a house of cards, sooner or later fall. Currently holds because the risk of insolvency of Italy is still good, because banks earn us ... But when the banks decide not to give us more confidence, not to "stretch" more debt, we will end up like Greece.
Why the opposition does not say anything?
I think MPs do not say anything because they do not even understand what what we're talking about. Are all operations that make the investment banks, often even their boards of directors they know. He knows everything is the Secretary of the Treasury, who in fact tries to pull the purse strings with all the other ministers. But meanwhile, continues to allow these operations, otherwise they would have to admit that we are being very badly.
The scenario that emerges is apocalyptic ... From the economic point of view what would be the solution?
Meanwhile, more than half of the Italian GDP is black. If economic activities on those taxes were paid, the debt would be halved immediately. But above all the way out is a drastic change of the political class: a government and a new parliament, which are able to understand these financial transactions. They must determine how large this debt and then actually roll up their sleeves.

Elena Theban

elena.tebano [at] rcs.it