Post: #1

Here's a story to watch:

Quote: If the “no” vote wins, Renzi has promised to resign. This would throw Italy into a political crisis. Then there would be a real potential to elect parties that would call for a vote on whether to stay in the European Union. And at this point, it is not clear what the Italians would decide to do.

The European Monetary Union does not work very well, if at all, without Italy. A “no” vote would be the death knell of the euro.

Nick Andrews, who writes for my friends at Gavekal, gives an excellent summary of the situation in Italy. And, it is worth every bit of your attention.

Nick Andrews Wrote:Prime ministers come and go in Italy—four since the financial crisis—but precious little seems to change. The latest incumbent, Matteo Renzi, has pursued structural reform more energetically than his predecessors. But for all the progress he has made, he might as well have been wading through molasses. Now, in a bid to secure a popular mandate for his restructuring program, Renzi has bet his premiership on a referendum over badly-needed constitutional reforms. It is a high stakes gamble. If Renzi wins the vote, which is due in either October or November, his proposed measures will streamline Italy’s legislative process, breaking the parliamentary gridlock which has crippled successive governments, and opening the way to far-reaching economic reforms. If he loses, Renzi has promised to step down—a pledge that has turned the referendum into a popular vote of confidence in the unelected prime minister, his Europhile policies, and—by extension—Italy’s membership of the eurozone itself. As a result, a “no” vote in October will not just precipitate the fall of Renzi’s government; it could throw Italy’s long-term membership of the eurozone into doubt, plunging the single currency area once again into crisis.

http://www.forbes.com/sites/johnmauldin/...2b419111da

Post: #2

The Italians voting to leave the EU? Will never happen. Their country, its banks, currency and policies are aligned with the EU too much, unlike the UK.

Its Greece 2.0.

Post: #3

(Yesterday 12:49 PM)Foolsgo1d Wrote:  The Italians voting to leave the EU? Will never happen. Their country, its banks, currency and policies are aligned with the EU too much, unlike the UK.

Its Greece 2.0.

Agreed. Numbers wise they are just as bad as Greece but Italy is a much bigger piece of the Eurozone, with the core countries having large exposure to Italian debts. France especially is nearing 300 billion Euros of exposure.

I think also relevant is the Italian banking crisis lurking in the shadows as any bail-outs or bail-ins will certainly have an effect on voter sentiment. Lost in the noise created by the Brexit is the Italian debt ticking time bomb.

Quote:As a result of all this, an Italian government led by the 5 Star Movement might plausibly go into negotiations with its Eurozone counterparts believing that it holds the trump card—namely the threat of a referendum on Eurozone membership. This would make it difficult for the Eurozone to play hardball with Italy or kick the can down the road. Policy makers would thus be left with the unenviable choice of either calling Italy’s bluff, and potentially sparking a regional or even global financial crisis, or fast-tracking integration plans and sanctioning greater burden-sharing. The electoral cycle in the region will further raise the stakes. While the French government might be happy to agree to greater burden-sharing, such a deal would be political suicide for Chancellor Merkel in the build up to the German federal elections in 2017.

Black swan: Although one thing Italy has that the other PIIGS don't is the 4th largest gold holdings in the world @ 2450 tons. In extremis (say after a force majeure on debt) they may just be arrogant enough to thumb their noses at Brussels and peg a new Lira to those reserves.

Post: #4

Italy is completely different from Greece and it is entirely possible that they could leave the Eurozone. Northern Italy is heavily industrialized, but the country's economy has been stagnant since it joined the Euro because it's currency is now overpriced. The government's finances are stable but Italy suffering a banking crisis due to 15 years of lousy economic.

Italy has been the biggest loser of the Eurozone and at best Italians are ambivalent about the single currency. I wouldn't be surprised if they vote to leave it in the near future.

Post: #5

Does anybody know how it would work to peg the lira to the 2450 tons of.gold that Adonis referred to. I calculate this is worth about $100 billion, but given Italy's $1.8 trillion GDP, and a monetary velocity around 2, their money supply should be closer to $700 billion.

When you peg a currency to gold, instead of doing fiat money, does the gold reserve have to be 1:1 with the money supply, or do they have more money circulating than the amount of gold backing it?

Post: #6

(Yesterday 04:43 PM)da_zeb Wrote:  Italy is completely different from Greece and it is entirely possible that they could leave the Eurozone. Northern Italy is heavily industrialized, but the country's economy has been stagnant since it joined the Euro because it's currency is now overpriced. The government's finances are stable but Italy suffering a banking crisis due to 15 years of lousy economic.

Italy has been the biggest loser of the Eurozone and at best Italians are ambivalent about the single currency. I wouldn't be surprised if they vote to leave it in the near future.

Italians won't do a thing. EU politicians are the same breed and want their money. The Greeks threatened revolt if they were lied to and what happened?

Their politicians kept them in the EU with yet more promises and a triple generation debt owed to some uber bankers nobody knows about.

If countries in the EU want change then it must come as a collective.

I feel there is something we don't yet know or are ignoring. What force of will is keeping all of these countries together when there is so much evidence to counter any pro-EU argument out there?

It is a combination of money and power but it would take so damn long to string it all together.