Sunday, February 7, 2010

Post 214. Bankrupt Italy has the largest class of ' the wealthy ( thieves)'.

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Bankrupt  Italy  has   the  largest  
class  of  ' the  wealthy ( thieves)' in  Europe.

Greece is about to be placed under administration because of its public debt and its ratio of debt to GDP. The level of debt is rising while production is dropping. In essence, Greece will be obliged to surrender part of its economic sovereignty to the EU in order to survive. Today’s newspapers are talking about the European Countries that are in trouble, without mentioning Italy (!?). PIGS, an acronym representing the four Countries at risk, namely P for Portugal, I for Italy, G for Greece and S for Spain has thus become an unpronounceable PGS. Italy has disappeared so it must have become virtuous. Portugal, which is widely believed to be the next Country to follow in Greece’s footsteps, has a public debt to GDP ratio of 76,6%. If only ours were that low! Italy is sitting with a debt to GDP ratio of 115% and 1,800 billion in public debt. The beauty of the economy is that it is so varied and everyone can continue to bullshit until the moment of default. As from today, the Blog has a new host, namely Eugenio Benetazzo, and a new appointment with "Chaos economy".
The public debt and the PIGS (expand | compress)
A friendly hello to all the readers of the Blog. My name is Eugenio Benetazzo and I am an independent Stock Exchange trader and an economics expert. We are going to attempt to provide a framework that is as exhaustive as possible on the economic and macroeconomic scenario facing our Country. We are all well aware of what has happened during the past 18 months, including the phenomenal interventions implemented by Western Governments, in order to bolster their economies. Now, with the benefit of hindsight, we realise that nothing has changed and the problems that existed 12/18 months ago, particularly the problems of debt, have merely been postponed. The debt has not disappeared, nor has it been covered, but it has simply been converted from banking system debt or debt accumulated by specific groups of companies to public debt, which has thus been placed at the door of the various communities, in other words the various Countries.
If we take a closer look at our Country, we realise that Italy’s public debt, which has now risen to a very serious level of more than 1,800 billion Euro and that, when compared to the Country’s falling GDP in 2009, gives a debt to GDP ratio of more than 120%, we find that this macroeconomic variable is beginning to become a particularly serious concern because if, as usual, we consider what is happening in Europe, such as the downgrading of Greece’s public debt less than one month ago, we begin to see a possible scenario that is anything but comforting. Greece itself is one of the smaller European Countries and the fact that such a relatively small Country can default on its debt is not particularly disturbing in itself. However, this changes if we begin to consider the so-called PIGS, or Countries with a macroeconomic scenario that is very similar to that of Greece. PIGS is an acronym that stands for Portugal, Italy, Greece and Spain, all of which have shown a significant increase in their levels of public debt precisely in order to support their respective economies during the past year
Argentina (expand | compress)
We often hear talk of comparisons with what happened in the past, especially as regards the case of Argentina, which occurred some ten years ago now but is beginning to reveal a number of similarities with our current scenario and holds potentially negative consequences for our Country, as well as for Europe as a whole. When Argentina defaulted on its debt, the Country’s debt to GDP ratio stood at 138%. Ours is currently standing at more than 120%, so we are beginning to get uncomfortably close. In addition to the problem of the Argentinean debt, we must not overlook the concerns linked to the so-called southamericanisation of any given Country.
Southamericanisation is a term used to define the substantial, widespread and progressive impoverishment of the majority of the population while the wealth of a small number of people skyrockets. That is precisely what is happening to us Italians, with a systematic increase in our level of debt and, on the other hand, an absolute plunge in our ability to save.
The most important question we need to ask ourselves, as has emerged from the analysis in the Italian financial press, is how the deficit of some 37 billion Euro will be covered over the next three months. A deficit of 37 billion Euro is not unreasonable considering the reduction in company invoicing in the previous quarters, a drop in company invoicing that has resulted in reduced tax revenues. Tax revenues are therefore insufficient to cover the Country’s current running costs on an ongoing basis. But there is more, and certain independent analysts are beginning to raise the possibility of the Government implementing a mandatory tax levy, as was done by the Amato Government back in 1991 whereby, if any of you can remember, a tax of 6 per thousand was levied on positive bank balances in view. If we add up the amount of money that is currently in the hands of the Italians in the form of financial capital, we find that this is in excess of 2,500 billion Euro, we then calculate that 1% or 2% of that would cover the 40 or 50 billion Euro shortfall. These are not my words but those of recent statements made by the current Government
Imminent future default? (expand | compress)
From a financial perspective, the Country is currently burdened by 82 billion Euro of interest payments (per year, Ed.) and debt repayments, past debt that is made up of two parts, namely 2/3 medium – long term and 1/3 short term debt. If we take a look at who is holding this debt, we find that 50% of it is in the hands of Italians, namely the banks, pension funds, mutual investment funds, etc, while the remaining 50% is in the hands of foreign investors. This would lead one to assume that any form of default would be highly unlikely in the Italian situation because, if anyone were to compare it to the Argentinean situation, the fact is that the latter was a very different case as regards the holders of the public debt, whereby 90% of Argentina’s public debt was held by foreign investors, which enabled the Government to default on payments precisely in order to avert any repercussions within the Country.
The de-industrialisation of Italy (expand | compress)
What we are paying for now, in terms of the reduction in manufacturing activity, is none other than the collateral effects of absolutely criminal business decisions. In Italy, both the right wing and the left wing and including the centre, embraced the choice of progressive de-industrialisation, assisting entrepreneurs and major industrialists to shut down their manufacturing plants in Italy and to set up shop elsewhere, outside of the Country’s borders and even outside of the European Community by enabling the much-vaunted "commercial bridge", which everyone knows about and that creates economic inequality by enriching those that are able to exploit the so-called industrial transformation system and impoverishing those that instead bear the consequences. The has not been a single political force, not to mention political farce, that has come out in defence of the areas where our Country’s real strength lies, namely the “Made in Italy” brand, tourism and the manufacturing hubs for which Italy is renowned worldwide. We have recently witnessed an economic phenomenon whereby other Countries exploit the opportunity to clone or copy products, using vocal similarity to counterfeit certain Italian products to produce similar products outside of the “DOC” or “DOP” areas, for example Asiago cheese produced in the State of Wisconsin or Limonciello liqueur (with an i) manufactured in China. Unfortunately, anyone who truly believes that, anytime soon, we will be in a position to regain the level of competitivity enjoyed by most Italian manufacturers only ten years ago thanks to a favourable exchange rate is very sadly mistaken.
More specifically, we are facing a collapse in the industrial manufacturing sector that will take us back 20 years, meaning jobs that we will never be regained. Those who are thinking about copying the English model, which is based on the services and advanced tertiary sectors, has unfortunately entirely failed to grasp precisely what happened in England, a Country that, more than 20 years ago now, chose to follow the Thatcher route that entailed the selling-off of major State assets, or in other words privatising everything. Now, twenty years on, while England is still rueing those criminal political choices, these people that continuously talk about a recovery while in 2009 our GDP dropped by 6% and the forecasts for 2010 show an expected recovery of + 0.10% or 0.20%, in my opinion this is anything but a recovery and smacks of us being taken for a ride
Thanks to all of you, good luck and see you again soon!

Posted by Beppe Grillo at 08:52 AM in |

Comment-:  POVERA   ITALIA!


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