Tag Archives: Italy

If You Read Between The Lines, Global Economic Leaders Are Telling Us Exactly What Is Coming, by Michael Snyder

Posted on August 22, 2018 | Leave a comment

Very few come right out and say what they mean anymore, but if you pay close attention, sometimes you can figure it out anyway. From Michael Snyder at theconomiccollapseblog.com:

Sometimes, a strongly-worded denial is the most damning evidence of all that something is seriously wrong.  And when things start to really get crazy, “the spin” is often the exact opposite of the truth.  In recent days we have seen a lot of troubling headlines and a lot of chaos in the global financial marketplace, but authorities continue to assure us that everything is going to be just fine.  Of course we witnessed precisely the same thing just prior to the great financial crisis of 2008.  Federal Reserve Chair Ben Bernanke insisted that a recession was not coming, and we proceeded to plunge into the worst economic downturn since the Great Depression.  Is our society experiencing a similar state of denial about what is ahead of us here in 2018?

Let me give you a few examples of some recent things that global economic leaders have said, and what they really meant…

–Tesla Motors CEO Elon Musk: “We are definitely not going bankrupt.”

Translation: “We are definitely going bankrupt.”

Tesla is a company that is supposedly worth 51 billion dollars, but the reality is that they are going to zero.  They have been bleeding massive amounts of cash for years, and now a day of reckoning has finally arrived.  A severe liquidity crunch has forced the company to delay payments or to ask for enormous discounts from suppliers, and many of those suppliers are now concerned that Tesla is on the verge of collapse…

Specifically, a recent survey sent privately by a well-regarded automotive supplier association to top executives, and seen by the WS , found that 18 of 22 respondents believe that Tesla is now a financial risk to their companies.

Meanwhile, confirming last month’s report that Tesla is increasingly relying on net working capital, and specifically accounts payable to window dress its liquidity, several suppliers said Tesla has tried to stretch out payments or asked for significant cash back. And in some cases, public records show, small suppliers over the past several months have claimed they failed to get paid for services supplied to Tesla.

–Shark Tank billionaire Mark Cuban: “I’ve got a whole lot of cash on the sidelines.”

Translation: “I believe that the stock market is about to crash.”

To continue reading: If You Read Between The Lines, Global Economic Leaders Are Telling Us Exactly What Is Coming

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Looks Like Italian Default is Back on the Menu, by Tom Luongo

Posted on August 18, 2018 | Leave a comment

Will southern European debt or emerging market debt kick off the next financial crisis? They’re both strong contenders, running neck-and-neck. From Tom Luongo at tomluongo.me:

Italian Deputy Prime Minister Matteo Salvini was right to call out the EU over the failure of the bridge in Genoa this week.  It was an act of cheap political grandstanding but one that ultimately rings very true.

It’s a perfect moment to shake people out of their complacency as to the real costs of giving up one’s financial sovereignty to someone else, in this case the Troika — European Commission, ECB and IMF.

Italy is slowly strangling to death thanks to the euro.  There is no other way to describe what is happening.  It’s populist coalition government understands the fundamental problems but, politically, is hamstrung to address them head on.

The political will simply isn’t there to make the break needed to put Italy truly back on the right path, i.e. leave the euro.  But, as the government is set to clash with Brussels over their proposed budget the issues with the euro may come into sharper focus.

Looking at the budget it is two or three steps in the right direction — lower, flat income tax rate, not raising the VAT — but also a step or two in the wrong direction — universal income.

Opening up Italy’s markets and lowering taxpayers’ burdens is the path to sustainable, organic growth, but that is not the purpose of IMF-style austerity.  It’s purpose is to do exactly what it is doing, strangling Italy to death and extracting the wealth and spirit out of the local population, c.f. Greece and before that Russia in the 1990’s.

So, looking at the situation today as the spat between Turkey and the U.S. escalates, it is obvious that Italy is in the crosshairs of any contagion effects into Europe’s banking system.

To continue reading: Looks Like Italian Default is Back on the Menu

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Merkel’s Troubles Began in Syria and End in Italy, by Tom Luongo

Posted on June 25, 2018 | Leave a comment

Angela Merkel is immolating herself on the pyre of open immigration. From Tom Luongo at tomluongo.com:

It looks like we are entering the end of Merkel-ism in Europe.  German Chancellor Angela Merkel is approaching her final days in that position.

Be it next week or the end of this year, we are looking at unprecedented change in European politics thanks to Merkel’s insistence on taking in millions of Syrian and North African refugees from chaos unleashed by aggressive and insane foreign policy actions by the U.S. and supported by the EU.

From the destruction of Libya to the manufactured ‘civil war’ in Syria the displacement of millions of people was created from the desired to destabilize the entire region for the betterment of the U.S. and its allies in the region, Saudi Arabia and Israel. Jordan, Turkey and Qatar were originally involved but have since jumped ship in the wake of Russia’s intervention there.

Merkel’s current plight politically stems from her intractability in accepting the chain of events that led us to this point. All of the problems of Europe now stem from the collision of these foreign policy disasters and the economic degradation of the euro-zone from the flawed structure of the euro itself.

And the insistence of the U.S./Saudi/Israeli alliance to continue trying to manufacture a win in Syria that is clearly beyond their control at this point only tightens the noose around Merkel’s neck.

Let me explain.

Simply put, there is a perfect storm now arising in Europe as the consequences of a number of policies converge into this period of time.  They are as follows:

  1. Having each country maintain a separate central bank to issue sovereign debt denominated in euros is the main culprit for enriching Germany and the northern bloc like the Netherlands and Holland and impoverishing much of the rest of Europe — Portugal, Spain, Italy and Greece, to name a few.
  2. This mispriced the risk of these loans by implying a German backstop to them via the ECB and the Bundesbank.
  3. As the euro rose in the 2000’s the value of the debt these countries issued skyrocketed in real value, destroying their fiscal situation and forcing debt restructuring which kicked the can down the road.

To continue reading: Merkel’s Troubles Began in Syria and End in Italy

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Italy challenges the Western order, by Frank Sellers

Posted on June 21, 2018 | Leave a comment

Italy doesn’t like its debt, its immigrants, or the EU, and thinks perhaps Europe’s ought to loosen up towards Russia. This is all contrary to the EU playbook. From Frank Sellers at theduran.com:

With a massive influx of immigrants from across Africa and the Middle East, and growing poverty, Italy voted in a populist government representing policies which would seem to virtually overturn the postwar European order.

The austerity measures which have been imposed upon the Italian people have pushed more and more of them down into poverty, with the poverty rate doubling over the course of the past decade.

Relative to migration, Italy is one of the Southern European countries taking the brunt of the migrants who are flooding into Europe by the thousands, helped along by various NGOs which seek to alter the demographic makeup and economic and political order of Europe under the guise of humanitarianism.

The present economic metrics tend to perceive the profits of multinational corporations as a gauge of the health of the economy, rather than the economic situation on the ground level, faced by the Italian citizen. All of these and more are things which this new government has a view towards radically changing.

To combat Austerity, which may be tossed out the window, the option on the table is to review treaties to which Italy is partied which impose or advise them. Rather than gutting the population for the money which the government needs in order to cover obligations to multinational financial interests, a proposal was broached of launching a universal basic income, reduction in the pension age, as well as a flat tax system.

And while the migrant policy is still evolving, it has had a view towards repatriating the migrants which are already within Italy’s borders. Italy has already flexed its will on the migrants issue over refusing a ship full of migrants port in Italy, forcing it to set sail for Spain.

Foreign policy aims at softening the approach towards Russia by eliminating sanctions and by putting the focus on improving relations, benefitting Italy both by allowing a resumption of trade, and the perspective of Russia’s will and capacity to help get a handle on the situation in the Middle East, which is part of what prompts the migration issue, due to the region’s instability.

What this could mean is that an already strained relationship between Italy and the EU could be put to the test, or altered in a significant manner if these proposals are put into play after the fashion in which they were introduced during the elections cycle.

To continue reading: Italy challenges the Western order

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Posted in Business, Culture, Debt, demographics, Economy, Geopolitics, Governments, Immigration

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Salvini: “Italy Will No Longer Accept Refugees” As Spain Volunteers, by Tyler Durden

Posted on June 12, 2018 | Leave a comment

Italy has decided to play hardball with refugees. From Tyler Durden at zerohedge.com:

Over the weekend, Italy once again roiled Europe, only this time not with its plunging bonds but with its drastic shift in immigration politics, when the country’s new populist leader, Matteo Salvini, now operating as Minister of the Interior, made good on his warning last weekend that “the good times for illegals are over”, writing an urgent letter ordering Malta to accept a ship carrying 629 shipwrecked North African migrants currently sitting off the Italian coast – calling Malta the “safest port” for the passengers, and advising that Rome will no longer offer refuge.

The MV Aquarius

The Italian message to Europe was simple: having been the port of landing for tens of thousands of migrants in the past two years, Rome would no longer accept boat after boat of North African (or middle eastern) refugees.

Italy’s vocal resistance to accepting further migrants even prompted prominent globalist George Soros, the person many have accused of being behind Europe’s forced migration patterns, to urge the EU to compensate Italy for the 100,000+ migrants landing there, noting that the strong showing of far-right parties partly is due to Europe’s ‘flawed’ migration policies.

As for Italy’s “suggestion” that the Mediterranean island of Malta accept the migrants, not surprisingly it fell on deaf ears.

But if Italy (and Malta) would no longer accept migrants, and with Merkel’s “open door” policies in Germany now a taboo, the question remained: who would accept the countless boats of migrants still headed for Europe?

Moments ago we got the answer when that “other” PIIG, Spain, offered on Monday to take in the rescue ship MV Aquarius, that has been drifting in the Mediterranean sea with 629 migrants stranded on board after Italy and Malta refused to let it dock.

Spain’s Prime Minister Pedro Sanchez, who took office just over a week ago, has given instructions for the boat to be admitted to the eastern port of Valencia, his office said in a statement.

To continue reading: Salvini: “Italy Will No Longer Accept Refugees” As Spain Volunteers

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The Gently Rotting Debt-Ridden EU, by Alasdair Macleod

Posted on June 9, 2018 | Leave a comment

The EU is essentially Marxist in its orientation, and tolerates dissent about like Joseph Stalin used to. From Alasdair Macleod at goldmoney.com

The EU as a political construction is in a state of terminal decay. We know this for one reason and one reason alone: its core principle is the state is superior to its people. A system of government can only work over the longer term if it recognises that it is the servant of the people, not its master. It matters not what electoral system is in place, so long as this principle is adhered to.

The EU executive in Brussels does not accept electoral primacy. It shares with Marxist communism a belief in statist primacy instead. The only difference between the two creeds is Marx planned to rule the world, while Brussels is on the way to ruling Europe.

The methods of satisfying their objectives differ. Marx advocated civil war on a global scale to destroy capitalism and the bourgeoisie, while Brussels has progressively taken on powers that marginalise national parliaments. Both creeds share a belief in an all-powerful executive. The comparison with Marxism does not flatter the EU, and suggests it has a limited life and that we may be on the verge of seeing the EU beginning to disintegrate. Despite economic evolution in the rest of the world, like Marxian communists Brussels is stuck with a failing economic and political creed.

It has no mechanism for compromise or adaptation. A rebellion from Greece was put down, the British voted for Brexit, which is proving impossible to negotiate, and now Italy thinks it can partially escape from this statist version of Hotel California. The Italians are making huge mistakes. The rebel parties forming a coalition government want to stay in the EU but are looking to exit from the euro. Putting aside the impossibility of change for a moment, they have it the wrong way around. If they are to achieve anything, they should be exiting the EU and staying in the euro. Let me explain, starting with the politics, before considering the economics.

To continue reading: The Gently Rotting Debt-Ridden EU

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“The ECB Is Basically Giving The Finger To Italy”: Is Draghi Risking Everything To Teach Rome A Lesson, from Tyler Durden

Posted on June 7, 2018 | Leave a comment

One of the more consequential dramas on the world stage in what happens between Italy’s new government and the ECB and EU. It’s like Greece a few years ago, but Italy is much bigger and more important within the EU. From Tyler Durden at zerohedge.com:

Perhaps the most perplexing market-moving event of the past 48 hours, was the 1-2 punch of a Tuesday Bloomberg report that next Thursday’s ECB meeting is “live” in that policy makers anticipate (at long last) holding a discussion that could conclude with a public announcement on when they intend to cease asset purchases (QE), coupled with a slew of ECB members overnight coming out with unexpectedly hawkish comments.

Of these, the ECB’s otherwise dovish Peter Praet said inflation expectations are increasingly consistent with the ECB’s aim, and added that markets are expecting an end of QE at end of 2018, this is an observation and input that is up for discussion and that “it’s  clear that next week the Governing Council will have to make this assessment, the assessment on whether the progress so far has been sufficient to warrant a gradual unwinding of our net asset purchases.”

Other ECB hawks such Hanson, Weidmann and Knot doubled down on the central bank’s sudden QE-ending jawboning pivot, saying that the ECB could lift rates before mid-2019 due to “moderately” rising inflation, that market expectation of end of QE by end of 2018 is plausible, and that the ECB should wind down QE as soon as possible.

The market response was instant, and it not only pushed both German and Italian yields sharply higher…

… as well those of US Treasurys, but spiked the EUR while sending the USD lower, and unleashing today’s euphoric stock surge.

Now, it is hardly rocket surgery that without ECB support, Italian bonds are toast. After all, as we have shown and predicted since last December, without the only marginal buyer of Italian debt for the past 2 years – the ECB – Italian yields would soar, leading to a prompt default by the nation which would suddenly find itself drowning under untenable interest expense.

To continue reading: “The ECB Is Basically Giving The Finger To Italy”: Is Draghi Risking Everything To Teach Rome A Lesson

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Making Italy Great Again, by Peter Schiff

Posted on June 3, 2018 | Leave a comment

Populist parties do what’s popular, almost by definition. Unfortunately, what’s popular doesn’t always make any sense. From Peter Schiff at europac.com:

This week, market watchers around the world are justifiably fixated with the high-stakes, high-drama political developments unfolding in Italy. While a political crisis in the world’s 9th largest economy (International Monetary Fund figures, 4/17/18) would normally not be enough to cause an international meltdown, given how thin the global economic ice has become as a result of ever-increasing debt loads, even small disruptions can create systemic problems. But from my perspective, what makes the Italian drama so interesting is that it parallels so precisely developments in the United States. It’s amazing that more Americans do not realize, that when looking at Italy, they are looking at a fun house mirror reflection of the United States.

Italy is currently dealing with the results of an election in which populist political forces scored a big victory over the establishment, which they had judged to be both corrupt and ineffective. In other words, the Italians replayed the 2016 Presidential election in the U.S. The big difference is that here the anti-immigrant tendencies of the right and the economic populism of the left were united in one person: Donald Trump. In Italy, those positions are represented by two separate parties that normally would be rivals. But politics can make very strange bedfellows, and the absurdity of the current economic reality has made them partners.

As a result, the top two finishers in their recent election, the left-leaning Five Star Movement and the right-leaning Northern League have cobbled together a contradictory political program that mirrors the Trump agenda. While both parties share nationalist goals to curb immigration and fight for greater autonomy from the European Union, Five Star’s secondary policy goal is to lower the (already low) retirement age and institute universal basic income for all citizens, while the Northern League’s secondary policy goal is to lower income taxes. In other words, their proposed coalition would look to spend more and tax less. That’s the Trump agenda with a little Parmesan cheese on top. Apart from the appointment of a conservative Supreme Court Justice, Trump’s major political achievements have been massive government spending increases and tax cuts that have significantly widened the projected budget deficits. The irony is that the governments of Italy and the United States are among the most indebted countries in the world. (2017 IMF figures) And the solutions being proposed by both countries are to go even deeper into debt!

To continue reading: Making Italy Great Again

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Posted in Banking, Collapse, Currencies, Debt, Economy, Government

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Three critical lessons from Europe’s recent mini-meltdown, by Simon Black

Posted on June 2, 2018 | Leave a comment

Italy illustrates the important, and disturbing, interlinkages in the global financial system. From Simon Black at sovereignman.com:

Trying to trace the origins of the latest political crisis in Italy is like… well… trying to trace the origins of the decline of the Roman Empire.

There simply is no good starting point.

You can’t talk about the decline of Rome without a lengthy discussion of how destructive Diocletian’s Edict on Wages and Prices was in the early 4th century.

But you’d have to go further back than that and discuss all the lunatic emperors preceding him, all the way back to Caligula.

But you can’t talk about Caligula without bringing up the effects of the civil war between Octavian and Marc Antony… which was a direct result of the previous civil war between Julius Caesar and Pompeius Magnus.

Before long you’ve gone back in time more than 500 years trying to figure out why the Roman Empire collapsed.

Modern Italy isn’t so different. After all, this is a country so unstable that it’s had 64 governments in the seven decades since the end of World War II, averaging a new government every 14 months.

That has to be some kind of world record.

And to accurately diagnose how Italy ended up in such dire financial and political turmoil, you’d have to go back a -very- long way.

But for the sake of brevity, we’ll just go back to March. Italy held elections, and the “5-Star Movement” political party won the most seats… but not a clear majority.

This required them to establish a coalition with other political parties, which took weeks of haggling and negotiating.

But finally the 5-Star Movement was able to hammer out a deal and present a formal plan to Italy’s head of state, President Sergio Mattarella.

The President of Italy is almost purely a ceremonial role, like the Queen of England. But he does have the authority to reject key government appointments, including Prime Minister and Finance Minister.

And that’s exactly what he did– specifically opposing the nominee for Finance Minister, an economist named Paolo Savona.

Savona is a huge critic of the euro, and President Mattarella thought him too dangerous for the post.

Again, while the origins are more complicated than that, this is the basic plotline behind the most recent crisis.

Late Thursday night the Italian government announced a compromise, supposedly bringing an end to the uncertainty.

But to me, none of that matters. What I find -really- important is what an enormous impact this soap opera had across the world. And I think there are three critical lessons to take away:

1) On the day that the finance minster was rejected, financial markets worldwide tanked.

To continue reading: Three critical lessons from Europe’s recent mini-meltdown

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Posted in Business, Currencies, Debt, Geopolitics, Governments, Investing, Money, Politics

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Italy, the ESB and Europe’s Populist Fantasyland, by Daniel Lacalle

Posted on May 31, 2018 | Leave a comment

There is no law that says a government has to live beyond its means and go into debt, even though that’s what most of them do. From Daniel Lacalle at dlacalle.com:

The populist coalition in Italy has presented an “economic” program and a threat to the European Union that makes Greece look like a walk in the park.

Let us start with reality.

Italy’s economic problems are self-inflicted, not due to the Euro.

  • Italy has seen more governments since World War II than any other country in the European Union.
  • Governments of all colors have consistently promoted inefficient dinosaur “national champions” and state-owned semi-ministerial corporations at the expense of small and medium enterprises, competitiveness and growth.
  • Labor market rigidities remained, leaving high unemployment and differences between regions.
  • A perverse incentive financial system, where banks were incentivized to lend to obsolete and indebted state-owned companies in their disastrous empire-building acquisitions, inefficient municipalities, as well as finance bloated local and national government spending. This led to the highest Non-Performing Loan figure in Europe.
  • A nightmare legal system that makes it virtually impossible to repossess assets from bad debt, led non-performing loans through the roof and malinvestment to soar.
  • A thriving export and small enterprise ecosystem were constantly limited by taxation and bureaucracy. This made the thriving companies smaller and actively looking to set activities outside of Italy.

Because of this, government spending continued to rise well above revenues. As Italy -like Spain and Portugal- decided to penalize high-productivity sectors with rising taxes, revenues fell short, while expenditures continued to rise. Italy, like so many peripheral countries, created a massive “crowding out” effect of the public sector against the private. It is not a coincidence that most citizens in Italy, like Spain or Portugal, prefer to be civil servants than entrepreneurs.

It is no wonder that, while private companies managed to survive and improve “despite government”, debt and non-performing loans soared.

Now they blame the Euro. As if the same crowding out would not have happened outside.  The only difference is that outside the Euro the government would have destroyed savers and citizens through constant “competitive devaluations” that were the cause of the economic weaknesses of the past. Constant devaluations did not make Italy, Spain or Portugal more competitive, they made them perennially poor and perpetuated their imbalances.

To continue reading: Italy, the ESB and Europe’s Populist Fantasyland

 

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