There’s an event on the horizon that’s about to make the Greek economic crisis look like a mild inconvenience.
And for a region that’s already well within the reach of catastrophic debt for multiple countries, this impending threat is a danger to world.
The fuse has already been lit. Now all we can do is wait and watch for the collapse of the European economy…
To be honest, I’m still having a difficult time believing that elected government officials could be so ignorant, arrogant, or stupid.
Please pardon my aggression, but that’s really the only tone anyone can take towards this situation once it becomes clear what’s happening in Italy. But before we get to that, let’s quickly set the scene for Europe as a whole.
Debt has been running rampant throughout the region, most notably for the countries of Greece, Italy, Portugal, Spain, and Ireland. At least the later two are making a modest recovery…
And the European Central Bank has responded to the situation by lowering interest rates again and again, even to negative levels! Yet the situation is far from fixed.
And that brings is to Italy…
The big problem is with nonperforming loans being handed out by Italian banks. Those nonperforming loans, which or loans upon which the debtor is unable to make payments, make up roughly 20% of the country’s banking assets.
To put that into proper perspective, nonperforming loans in the United States never rose above 3.5% even during the worst economic crisis we’ve seen!
That makes Italy a ticking time bomb as more and more loans default.
And that’s a huge problem for the global economy; being the 8th largest economy in the world, Italy’s fiscal demise would likely bring the European economy down with it, noting that much of the region is connected via the European Union.
But the worst part is the “bad bank” that Italy is talking about creating to solve a small portion of the problem – NOT the entire problem.
This bank would be backed with some government guarantees, but the idea is to have this bad bank sell mortgage notes to the public in some way!
This is a threat that Italy, Europe, and the world cannot ignore, yet I’m not sure that anything can be done about it anyway. The next move is deciphering just how bad it will affect our domestic economy…
