Record surge in bond yields as Italian debt crisis passes point of no return
Paul Joseph Watson
Wednesday, November 9, 2011
Veteran investor Jim Rogers warned this morning that there is a “100% chance” the world is facing a financial crisis worse than 2008, as Italy was plunged into chaos on the back of soaring bond yields which now make the country’s huge debt unsustainable, mandating yet another EU bailout.
“We’re certainly going to have more crises coming out of Europe and America; the world is in trouble. The world has been spending staggering amounts of money that it doesn’t have for a few decades now, and it’s all coming home to roost,” Rogers, CEO and chairman Rogers Holdings told CNBC.
Rogers said the only solution was to allow countries to go bankrupt and start again, arguing that the continuing cycle of debt would only exacerbate the problem in the long term.
“Last time, America quadrupled its debt. The system is much more extended now, and America cannot quadruple its debt again. Greece cannot double its debt again. The next time around is going to be much worse,” Rogers said, adding that the chance of the Eurozone crisis causing another global financial meltdown was “100 per cent” and that the fallout would be worse than the 2008 collapse.
Rogers’ warning came as Italy was plunged into crisis and bond yields surged to unsustainable levels despite Prime Minister Berlusconi’s promise to resign, a move that was seen as a stabilizing factor.
“The situation in Italy has grown increasingly precarious with the yield on bonds passing the level which suggests the nation will need to be bailed out. At 10.50am the yield on the 10-year benchmark stood at 7.419%, a massive 0.7% jump on the day,” reports City Wire.
Bond yields are the return which the government offers investors who buy debt in the form of bonds. The yield is surging because investors globally are dumping Italian bonds, forcing the government to crank the interest rate higher and higher in order to attract buyers.
This record high in bond yields now means that Italy’s debt is unsustainable without the aid of yet another EU bailout, which will come with strings attached in the form of austerity measures that are almost guaranteed to provoke unrest on a similar scale to what we’ve already witnessed in Greece.
“Right now Italy has a debt to GDP ratio of 118 percent. If they keep expanding that debt it is going to result in a financial nightmare, but if they try to implement strict austerity measures it is also going to result in a financial nightmare. They are damned if they do and they are damned if they don’t,” explains Economic Collapse Blog.
Paul Joseph Watson is the editor and writer for Prison Planet.com. He is the author of Order Out Of Chaos. Watson is also a regular fill-in host for The Alex Jones Show.
This article was posted: Wednesday, November 9, 2011 at 4:42 am