and portugal combined despite this euro zone leaders technocrats and central bankers try to reassure markets and the media over progress in the debt crisis over moves towards closer union and tighter reform we'll take a look though at the internal politics of one of europe's largest economies and ask what effect this union is having on these so called solutions will speak to a prominent talian columnist for answers and what is the psychology of a bubble well a look back over the years at federal reserve f o and the minutes when you break them down by the jokes cracked they were be allowed to repeat along with housing prices back in two thousand and six and i wonder who's laughing now we'll talk about it let's get to today's capital account.

all right u.s. markets are closed today and today was though the big day to see how european markets reacted to s. and p's downgrade of nine european countries one being france of course that lost its aaa credit rating that all happened friday after the close now also the bailout fund the f.s.f. was downgraded to well the markets didn't tank and so consequently greece seemed to capture major market share of those negative euro crisis headlines here is a sampling friday what happened was greece's talks with creditors broke down and reports are out there are bounding that there is a rising risk greece will face a disorderly default that is unless athens gets an agreement with its creditors to accept a voluntary loss on their holdings of greek bonds now greece may be at the center of today's news but bigger debts loom and much larger countries if it's this tough for athens what battles lay ahead for rome italy is the third largest economy in

the eurozone it is that eighth largest in the world and while it may be home to luxury brands such as ferrari and prague but you see there it's public debt to g.d.p. ratio is the third largest of any industrialized nation it's second only to greece among euro zone nations standing at a towering one hundred twenty per cent now this is one of the countries too that saw its credit downgraded by s.n.p. on friday meanwhile as monti's technocratic government in italy is pushing through reforms and merkel is pledging greater unity for the entire region is that really going to save the euro zone from collapse we may be missing the full story by not knowing what's really going on with in a country like italy here to tell us is calling this for the italian newspaper ill so late he's also a professor of international relations roberto del monte joins us now he's in our new york studio we're so lucky to have him to give us

a really insider perspective of what's going on in italy this very important. country so professor welcome to the show you know a lot of the headlines i'm seeing today i have one here are that the e.c.b. sees a sign of a let up in the debt crisis you know these are kind of the p.r. optics that we see also merkel last week was congratulating monti the prime minister of italy on the reforms that he passed through but i'm just curious average attalia is how did they see the debt crisis and whether it's making progress or not. of the energy in these very concerned and what is interesting use of the in spite of the very tough measures that could move the government as are already powers. the support through the years the pope who supported his remains very high this is extraordinary considering that he has cut pensions is raised taxes is receiving the gasoline price which is very sensitive

and yet the whole the survey's sees that the things are still favorable for large majority supports and why you know i think this is this go there and has assigned the people. this is a sign that people. are aware of the seriousness of the crisis i see gary is saying that you think that that's a sign but i'm curious why you think there is such that port when i see other opinion polls saying that more italians actually have concern over the euro they've lost confidence in nearly a third think it would be better to return to the lira. well this is not surprising that a third well actually i have done myself a survey on these things. in the head of a. research center and we do periodically these surveys and in my case i think. we have noticed less than one third really. rejecting the euro. the point here is this so far the majority of the things you

spoke of everything is going on still supports the euro in still supports the move to government and one of the reason in my opinion in the case of the support of the movie government is that the distrust of the all political class is so high there even monte is considered a. good alternative that's really interesting and you mentioned the old political class what is the new political class and the establishment and kind of the those figures in italy what do they think about the debt crisis and the way it's being handled because i'm sure that's a little different than the popular opinion. for the political class of this point we have to remember that the this that the political establishment. with the exception of two parties eighty percent of the members of parliament today support the move to government so that means that the realizing that the members of the of these dems who realize that this is the big field and this is the only way to go to

to to trust a technocrat government with the task of doing the things that they were not capable of doing well let's talk a little bit more about exactly how this is progressing and the economic issues here because italy is a little different than some of these other eurozone countries italy didn't have a housing bubble like ireland it doesn't have the very high unemployment like spain doesn't have the huge spending problem that greece had what italy does have is a very high public debt to g.d.p. and g.d.p. growth that has not been very good over about a decade so putting those two together how serious of a problem do you think italy's debt burden is to the future of its economy. how that debt burden is certainly a huge problem i wouldn't to the list of factors that are positive for italy. one that defected to these the second lenders manufacturing economy in europe so

it is no greece is no spain and there's no ireland we have the second largest manufacturing kind of we have to after germany and the other thing is the private wealth in italy is very high in the level of private dent he's very low. in many ways he. has potential to combine into these craters the one thing we have to mention which is that in this is where we view the problem as otherwise we couldn't. understand the difference between italy which is one hundred and twenty percent in japan which is two hundred percent and one of the problem is that a little less than half a liter in there isn't for you means that is the other side of the problem right of course and that's something we see italy continuing to struggle with as part of this euro zone solution i'm curious though what you said about insight into italy

you can mention that it's a nation of savers their private wealth is high that brings me to another comment kind of criticism that seems to be out there in the in the public narrative which is that italy has a tax evasion problem i've seen reports that forty two percent of boat owners claim that they make twenty thousand euro a year i know one of the austerity measures is that there can't be cash transactions of over one thousand euro the criticism that you hear of tax evasion sounds a little like what we hear about greece is there reality to it because i find it a little hard to believe that tax evasion is responsible for the situation that italy finds itself in. tax evasion is certainly part of the problem particularly in setting it to the the level of tax evasion is is too high and not soon to the parts of the concrete so i think overall the level of tax evasion is certainly not what would we find in greece but he's one of the problems the country has ensued because so far there's been too much tolerance reserve effects of vision one of the things

that i'm looking at these days is that these government to send a clear signals. that the exhibition would not be tolerated the problem years after this government is gone because this is a temporary government and this and forget that in two thousand and thirteen there will be new elections in the what these polling see of zero tolerance reason effects of age would continue. ok and one of the issues that you brought up is the issue of the south and i think it's interesting when you look more broadly at european integration one of the problems that you saw with countries like france and italy is that is integration moved forward you sometimes saw disunity and political divisions arise within nations is a problem that we're seeing in italy now because i know there are divisions between north and south. yes they have the vision between north and south and this is. i would i would i would say that the north south gap is the most important problem

that we are facing and this is an historical problem but is really our most serious drawback of the north-south camp the other thing is that they had a vision almost two and now in the north you know that these are partly the league nor the northern league and it's the boss who uses lead and found that today is thinking is not supporting them on to government. this is interesting because you know berlusconi party which has been the story choli of the northern league is supporting. the government the northern league is not and the league is taking a very until you stance so this is another division which we've also seen in other european countries but this is a new development i think it's divorce between the divorce between those cornball see this split in the conservative. movement and these are some of the internal divisions that we don't really hear when you hear the broad crisis solutions talked about i want to get more into those we're

going to take a quick break but we will be back with more with professor delamont today. all right we're going to take a break to do word of the day this is where we break down a financial term or concept for a very smart viewer but just maybe not the financial expert and today it's something that goes along with the discussion we're having it's also something that we've talked about in previous shows without a whole lot of explanation so it's l t r o and to give you an example of where it showing up lately here's a little bit from an article use of the european banks three year funding programme is expected to exceed five hundred billion euro and february when lenders are offered their second chance to access its new long term refinancing operation or l t r o that's according to credit suisse so what are l.t.r.

as exactly well here's the formal definition ok these are repo auctions used by the european central bank for the content for the conduct rather of monetary policy they form part of the central bank's open market operations but instead of providing short term financing for commercial banks as is done through m r o's the l t r o's offer a longer term financing typically using repos that mature after three months let me break this down for you though away from kind of this language that is kind of confusing so this is one of the normal tools used by the e c b to conduct monetary policy why has it gotten so much attention now let me tell you the reason it is because the amount of money and the maturity of these recent loans were longer and higher than we've seen they were auctioned on december twenty second the loans typically mature in three months these mature in three years and almost five hundred billion euros worth were auctioned off for banks to borrow so this is cheap

money made available for a long time now the reason the e.c.b. did this with. that was hoping that banks would borrow that money and buy higher yielding sovereign debt does helping to mitigate the funding crisis and they make money on the spread now they didn't do that instead that money has ended up right back at the e.c.b. as deposit facility which is something we've been covering so they're earning less interest on those deposits than the banks paid to borrow that money in the first place so that should indicate something to you about maybe the fear that banks are experiencing not exactly the success policymakers were hoping for but that is the significance of l t r o and still ahead stay here laughing in the face of danger seems that's what the fed was doing back in two thousand and six right is housing prices heat we'll give you our three cents on what the past f.-o. once the minutes show us.

just put a picture of me when i was like nine years old and just you know lou true. i'm interested i am at home get a printer i love driving hip hop music and. i do it's kind of yesterday. i'm very proud of the world without you it's a place. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else to some other part of it and realized everything you thought you knew you don't know i'm trying hard to think of.

what dr. the world the fear mongering used by politicians who makes decisions to break through. who can you trust no one who is you who with a global reach where we had a state controlled capitalism is called sasha's when nobody dares to ask we do our t.v. question more. welcome back we are delving into italy today because even though the eurozone crisis is in the news every day you don't get the kind of inside perspective about what's really going on we usually get the big picture this is what the big eurozone leaders are saying the technocrats the central bankers you see numbers like

a new poll today found that fifty five percent of italians have lost confidence in the euro nearly a third think you would be better to return to the lira but when you talk to someone who's inside the country as we're doing you see a different perspective he even had different numbers than what we just offered there so we want to get more into this i want to bring back columnist and professor roberta delamont today to continue answering some of these biting questions that we don't usually get answered by analysts particularly in the u.s. watching this from afar so let's continue on the north south division because even though you're saying this is the key issue it is one that you do not see a lot of attention paid to in the mainstream media so i guess what i want to know is how is that affecting the way italy is able to deal with the crisis within italy and the way that it's able to deal with the crisis as a nation more broadly with other eurozone countries.

we'll it's it's as they say there's a very serious issue. because it has economic implication as a cultural implication and political implications the south is being a drain on the resources of the central government for many many years and today with two fewer resources the problem will be no how. this will fare in any situation of scarcity of funds from the central government this may have an impact on the political stability as well because in the south the southern is vote so we live to see a very critical turning point will be the next elections people were expecting elections actually come before the due date which is two thousand and thirteen what i can say with confidence now is that the monti government will survive this year they would know they would not be early elections so everything is census

postponed to spring of two thousand and thirteen that is the turning point so spring of two thousand and thirteen just to reiterate the date that people should be should be looking at ok and going on to two thousand and thirteen and beyond if this inequality between north and south and south remains this open wound do you think that it will be possible for italy to move towards further integration as is being pushed. well italy cannot afford to exit the euro zone or the in the european union. has it would be a disaster for the country i think it would be a disaster for europe which leads us to the larger question you know. will really the eurozone survive and will the european union survive and my answer to that question is yes i think there's a lot more pessimism on this side of the ocean over the long term prospects of the european union the euro zone that there is in europe itself. that i like and you're

living i want you to hold it right there because you're in new york but you're based in italy i believe so you notice a very different way that people perceive this crisis in new york where you are versus at home in italy. absolutely europe and when i say europe i also mean germany cannot afford to see the project of european integration to unfold the real point here is the the end of the you the collapse of the euro will not bring back to the day before the treaty of mastery that with your masters when the decision was made to go ahead with the euro zone it will bring a spank to maybe eight and eight hundred fifty days the day before the announcement of the shoeman plan which started the old process of european competition in other words the collapse of the euro will mean not just the collapse of the common currency but the collapse of the common market and the collapse of all all

everything we've seen since one thousand fifty one you who go back to it to a bunch of nation states competing with each other would be disastrous for europe it would be a disaster for the west would be a disaster for the united states and certainly you know also would not be good for germany right now be good even for germany and that's probably part of the reason why everybody is you know trying as hard as they are to keep this thing together really quickly before we go i know you said that everybody most people seem to be putting their faith in monte's government and that the political class is was happy that it's just not berlusconi anymore so clearly there were people that didn't want berlusconi in office anymore they wanted him out but how do they feel about the way this was done this is a technocratic government that wasn't elected by the people of italy. no is not elected by the people with the good people tend to forget the everything the government wants to do has to be approved in parliament the monkey is not a roman the paper has been put there we can merge and super powers dictatorial

powers can do anything you want he can propose he goes into parliament and he has to get the votes so the parties have to prove the advantage to the moon to go on the air as over any of the government is the in years and the other members of the cabinet are not seeking a reelections these a disconnect with with the voters and at this point this is what we need we need to have a government that is able to face own popularity because it doesn't care for the vote it's an interesting point is in but the parties in parliament have to prove everything the monkey government does that's an interesting point maybe he's not subject to the same popular scrutiny of re-election that we see play such a role certainly here in the u.s. we're out of time actually we sure do appreciate all of the insight you offer he's not a roman dictator you say but we'll have to see if we can lead the charge to get the bond market to let italy have some more sustainable long term interest rates on all

that debt and see how this crisis wraps up or does not but we appreciate you being on the show that was a professor roberto delamont a. all right before we go let's bring this back to the u.s. for a little bit to end the show with some loose change i want to bring in my peanut gallery dimitri kovtun as our producer and shannon donahoe holding down the floor in the control room to talk about a couple stories so turns out the slaying used for currency for number is for countries on the foreign exchange is starting to die on trading floors let's just take a look at some of the slang that's been used for numbers one is

a spaniard two is a perfectly three is a carpet i don't know how you would even understand that slang it's basically code but insiders say that we can blame it on electronics as a lot of the trading is done on computers and no longer voice so you know we know that high frequency trading has moved a lot of this trading off of florida sixty three percent of it is the kind of latest number i could find for the amount that's high frequency trading but i didn't know it was killing the culture of these bizarre and i don't know kind of cool. words so we don't have that we don't have that we have this really great video but i have the video i don't have the video to show it well this d.v.d. acted out was that this is the evolution of for a man to machine i mean this is we've talked about sky that before. we talk about the finger of the machine going rogue this is just the next phase that you know they have to develop their own language so they're kind of pushing aside the old words and developing their own code and you know it's just you know to be expected

i don't know i think we can still see some life on the trading floor because from what i understand the chatting that you can do from bloomberg terminals is kind of maybe where this is going towards because there's a lot of kind of dating it's done or hitting on your turtle between computers yeah there's some kind of chat that traders can use on the bloomberg terminal but the computer's dating the computer while that's the net maybe that's going to drink that's next the computers are going to start dating people are going to be out of this entirely. pretty much i mean computers are basically going to have their own language and they're just going to survive. i wonder if i have more successful relationships maybe moving on speaking of successful relationships one of the signs of those is maybe laughter which turns out the federal reserve did a lot of when times were good or at least looked good so transcripts from the fed meetings back in two thousand and six and from beyond were released and so on zero hedge actually went through and combed the numbers and tracked the number of jokes

and laughter to see kind of how those numbers correlated with what the economy was doing if we could bring up that chart of jokes so you can see that it was on the up and up and really they were cracking up the committee was laughing their butts off in two thousand and six and this is right around the time let's show what housing prices were doing so this is when housing prices were peaking we all know how that went. is this like an interesting correlation though to look at the psychology of bull and bear markets do you think people are jumping because they felt like times were better i thought they were policies were working well i mean it's funny i've combed through meetings with minutes before and i have very little one specific time where was angry spends i think was birthday there are some very lot of a lot it makes sense that they would be they would be so positive after all they had kept rates so low and things were going so well and they kind of maybe just of the party you would keep going about the party would keep going i wonder i wonder how much they're laughing now we're going to have to comb through those minutes

really quickly to also what came out of those meetings ben bernanke we heard a fed governor warn about the nation's mortgage market now this is back in two thousand and six but he described the cooling of the housing boom as a healthy thing didn't think this was going to be a big deal is that when the laughter stopped when he thought it was could be no big deal when they realized that that was wrong. you know you have to you have no no dimitry i don't comb through the. one after better than i did read any how much ben was laughing or showing he was up i think just heard it coming out it was five years ago that the right way to sort of you know that the right thing ok so we'll have to wait to know but shannon it could be any amount of money or a lot to get you to go through those fed minutes i mean the rest of it must be pretty boring but i'm in control after be confronted with the stenographer approach laughter you're right is a very good shark at all right we're going to have to leave it at that you can let us know what you think about the fed laughter that's all we have time for but thanks so much for tuning in to our show you can follow me on twitter at lauren

lyster until we're back with more rate analysis tomorrow you can give us feedback at youtube dot com slash capital account we're actually going to be not having a show tomorrow we have some technical stuff that needs to be taken care of will be back on wednesday with a fresh show until then have a great night. which was that so much as i can which of course is live on it so here we can see america's global military strategy or just more of the same broken home is new vision for the pentagon is a bit saving. down the official t. obligation to go on the line called touch from the choose option. one job life on the go. video on demand. will cost.

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