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Barclays Capital has done the math on what the events in the past several days reveal for Italy and the math is not pretty. The
conclusion is that “Italy is now mathematically beyond point of no return.” Words: 583
So conveys Tyler Durden (www.zerohedge.com) in a summary article* and link which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) posts below:
Summary from Barclays Capital:
- At this point, it seems Italy is now mathematically beyond point of no return
- While reforms are necessary, in and of themselves they not be enough to prevent crisis
- Reason? Simple math–growth and austerity not enough to offset cost of debt
- By our estimates, yields above 5.5% is inflection point where game is over
- The danger is that high rates reinforce stability concerns, leading to higher rates and
- A deeper conviction of a self sustaining credit event and eventual default
- Decisions at eurozone summit is step forward but EFSF not adequate
- Time has run out–policy reforms not sufficient to break negative market dynamics
- Investors do not have the patience to wait for austerity, growth to work and
- Rate of change in negatives not enough to offset slow drip of positives
- Conclusion: We think ECB needs to step up to the plate, print and buy bonds
- At the moment ECB remains unwilling to be lender last resort on scale needed but frankly
- ECB will have hand forced by market given massive systemic risk
Hint: Not Good. Sell EUR, Buy Gold
The broader referenced report can be found here.
*http://www.zerohedge.com/news/barclays-says-italy-finished-mathematically-beyond-point-no-return
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