The corrupt bank/government ponzi

Robert Wenzel reports here about how the Italian banks are choke-full of Italian government debt, and how this might damage the private sector. He ends with the rhetorical question "What happens when Italian banks are so stuffed with Italian government debt that they can't buy anymore?"

Unfortunately, due to a piece of news a few days ago, I think we have the answer - Italian banks are never going to be so stuffed with Italian government debt that they cannot borrow more, instead, they are going to run on insolvency fumes until the cash flow dries up. How else does one explain this :

"May 19 (Bloomberg) -- The Bank of Italy’s decision to stop requiring banks to mark the value of their government bond holdings to market will spare lenders an 800 million-euro ($984 million) reduction in their regulatory capital, analysts said.

The second-quarter losses to date would wipe six basis points off banks’ core Tier 1 capital, a measure of a lender’s ability to absorb losses, analysts at Milan-based brokerage Equita SIM SpA said in a note to clients today. A basis point is 0.01 percentage point."

I wonder how many countries have this kind of relationship between their banks and government. Governments save bankrupt banks, and when the government thereafter goes bankrupt, it revokes rules that demand that banks report when they are bankrupt, and demand that said banks bankrupt themselves by borrowing money to the bankrupt government.

The world economy is officially a ponzi scheme.