A Brilliant Insight From George Soros On Why Italian Debt Is ‘Practically Riskless’

Yesterday we posted George Soros’ interview with Reuters’ Crystia Freeland, in which he explained why he’s bullish on Italian debt, and wishes he had more of it.

Near the end of the interview, he explains why, for Italian banks, purchases of Italian debt are “practically riskless.”

Why? Basically, because if Italy goes bust, then all of Italy’s banks are going to get crushed anyway, so there’s really no additional risk you’re taking on buy purchasing Italian debt, so why not reach for the yield?

It’s a simple idea, but it explains why banks would start buying the debt again (if plied with cheap ECB liquidity) even if nothing gets fixed.