IT IS THE CENTRAL BANKS THAT DETERMINE THE COST OF THE DEBT AND NOT THE MARKETS
Reporting of Pietro Ferrari
HERE IS THE DEMONSTRATION
Of First Gonzaga
( Savona is right. Without ECB reform any effort is in vain)
Two very simple considerations whose consequences have fundamental importance in the economy of the EU states and in this case, of Italy and Germany .
Microeconomic level: an investor who buys German 10-year Bunds (they are the equivalent of the BTP) every have loses approx 1,5 % of its capital. In fact it has a yield of 0,5% but inflation in Germany is at 2% and therefore has a negative real return. On the contrary, an investor who buys a ten-year BTP today earns approximately 1,4% annual. In fact the BTP pays the 2,972% of interest but inflation in Italy and the 1.6% . In this case the real return is positive.
Macroeconomic level: At the state level, obviously the reasoning is reversed, the German state sees its debt reduce every year due to the negative differential between interest rates and inflation. The Italian State on the contrary, having to pay a positive real interest, sees its debt grow inexorably. Read More
