It all comes down to this. Will the ECB provide the exit bid for those fleeing Italian bonds and, more importantly, will their action instill enough confidence to allow Italy to roll over existing maturities? If it doesn’t bring back buyers of Italian bonds, will the Euro have the spectacular collapse the Germans are so afraid of?
This is the show, folks. One of the largest sovereign debtors in the world is in trouble. We’ve had endless debates with very smart people about the consequences of central bank monetization of sizeable maturities of sovereign debt.
We find interesting the argument that the U.S. and Japan have not, and will not, have a sovereign funding crisis because they have a central bank ready and willing to monetize any and all funding shortfalls. If only it were that easy. Stay tuned.
P.S. Maybe the crisis in Italy will cause the U.S. Congress to have its Sputnik moment and develop a long-term sustainable fiscal policy. Let’s hope so.
Global Macro Monitor 
macromon says “We find interesting the argument that the U.S. and Japan have not, and will not, have a sovereign funding crisis because they have a central bank ready and willing to monetize any and all funding shortfalls. If only it were that easy. Stay tuned.”
People who think it is that easy ignore that democracies are multi-headed beasts governed by factions. Some factions hate inflation like poison; others love it like mother’s milk.