High praise indeed coming from roadmaster! Thanks man. Glad you liked it. I was hoping Yumbo was going to jump on this. I’d be interested in his commentary too.
Yes PP – I agree with RM – you beat us to it – so kudos! Apologies – I am travelling of late and my hours and internet connectivity are irregular.
Respectfully – I do not agree with anything this article says except there is an Italy and a Germany. Humourous perhaps but no more than that.
My view on any country in the single currency EU is this – unless a country is willing to take very drastic measures there is no way out but comply with the Troika – Wall Street, the IMF and the ECB. I will come back to these very drastic measures but first let us look at the EU policies and particularly at Italy and Greece.
The Troika have got their feet firmly on Italy’s financial throat and unless Italy complies with the current status-quo left by Paolo Gentiloni’s caretaker government (to pull back from a sovereign bond default) – Italy is going to go the way of Greece.
Let us look at why.
I have written on this some time back in 2016 -2017 [1][2]. Italy was a financial disaster waiting to happen – as one of the larger PIIGS (Portugal Ireland Italy Greece & Spain) the country was hoodwinked into joining the EU by Goldman Sachs just like Greece – with the expected result of banking failures from high non-performing assets.
This in English just means Italian banks lent to every man and his dog. Plus sold toxic bank bonds as investments which wiped out savings from a large proportion of the middle class and pensioners when bail-ins were effected. The debt load for defaulted loans could not be sustained.
This led to the prior government of Matteo Renzi resigning in late 2016 after they initiated a referendum to change labour laws to implement austerity – Greek style.
The people said no. Renzi resigned. Gentiloni’s caretaker government from 2016 onwards – in my view – did a good job of avoiding debt default and repair the economy when they came in.
However this was partly due to the ZIRP and QE measures of the ECB buying every bond in sight – government and private. This kept liquidity in the markets and prevented bank runs while the economy healed somewhat. Trade was up, inflation appeared again and banks were forced to liquidate NPA’s and consolidate.
What the country needed was investment, protection of savers’ assets and bank consolidation. This was delivered to a reasonable degree thanks to the acumen of outgoing Finance Minister Pier Carlo Padoan.
Things were looking up for Italy and it appeared a manageable fiscal recovery was underway without need for the planned IMF austerity. Last year Italy posted a 2.8% current account trade surplus over GDP – a full 1% recovery in one year. Bond purchases were up and confidence was returning in the Italian financial sector. The facts spoke for themselves. Confidence was returning. The most important asset of all.
Now we come to the new bunch of financial idiots leaving their villages en-masse to promise Guaranteed Basic Income from an economy just on the other side of sovereign default. Plus demanding all types of other fiscal goodies from money-printing. Great – not!
The expected is happening to the Italian financial markets. Italian government bonds are being sold off at record levels by investors – this includes Italian banks which are the main holders of these bonds.
The work done over the last two years just went down the toilet.
What now?
Well – if the Village Idiots think they can one up the Troika – then the following may happen.
The Troika will declare Italy (and Italian banks) in default. All government and private assets as collateral can and will be seized by creditors. Italy will have to accept recovery funding and go into austerity. No country inside or out of the EU will trade with Italy unless the Troika allows this.
Italy can threaten the Troika all it wants. The ECB is running QE and can liquify the other EU banks without issues. The most to lose from an Italian default is France – not Germany. But French banks are able to borrow from the ECB at no cost. In the case of any immediate liquidity concerns the ECB will borrow SDR’s (World Money) from the IMF. Done and done.
Italy will accept the terms of the Troika or Italy will starve. It is that simple.
We only need to look to Greece [3] to see how playing with the ECB’s b~~~~ turned out for them. Greece did not need to be punished like it was – this was a warning to the other PIIGS not to try hamfisted policies or the pork will surely fry.
One last thing – I mentioned drastic steps if Italians wanted to get back Italian sovereignty.
Greece was offered a way out by Russia to refinance its debt. This is not commonly known. Its position in NATO did not allow it to accept Russian help.
Therefore for Italy (or any other EU state) to be truly sovereign means not only leaving the EU – but NATO as well. The articles of the Lisbon Treaty are explicit – all EU states must be subservient to NATO’s interests.
And because of that – there is really no way out for the member states of the EU until the EU itself collapses from too much debt.
Hope this rant made sense.
[1] /forums/topic/update-italian-banking-crash-in-2017-2018/
[2] /forums/topic/update-i-italian-banking-crises/
[3] /forums/topic/greece-update-endgame-government-legalises-theft-of-peoples-assets/
Y_ 1 year, 8 months ago.
