The headlines driving markets in recent minutes is a rumor about Italian officials talking about bond purchases with China. The media of course will hold China up as though they are some white knight riding in to save these failing European nations. But make no mistake – that is not even remotely close to the truth.
On the one hand, China can “help” ease the strains in the Eurozone by buying bonds of various periphery nations. This helps kick the can in the debt game, but does NOTHING to solve it. We know this because we’ve already seen this movie once before. China made waves last year when they announced a firm commitment to buy Greek bonds. Of course, this announcement soothed markets for a few months and then the underlying trends took hold again and we all know what’s going on in Greece today.
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