Monday, September 22, 2014


I was looking at some numbers the other day and discovered something I hadn't known.  Do you know who has the third largest level of sovereign debt outstanding?  Italy.  Yep, La Bella Italia.  They have a lot of debt outstanding.  A lot.  Now at these levels of interest it's almost free but what I can't get a handle on is whether the levels stem from EUB actions, a dead economy in Europe or both.  One piece of intelligence may come from the complete flop of Sr. Draghi's Quantitative Easing program which has produced absolutely nothing in the way of increased lending.  Indeed, European banks haven't even bothered to look at it seriously.  In Europe, there ain't nothin' goin' on.

Whatever the case, somebody is holding a hell of a lot of Italian debt and one has to wonder how long this can continue.  Debt today totals 130% of GDP; growth is negative and the borrowings today are simply to service debt and pay the current bills.  A classic debt trap.  Now I know Italians are great savers; forget about under the mattress, they have Euros stashed away in places about which one would hardly drea…in and out of the country.  But it seems to me that no population could hold that amount of Euros which means that there is another player here.  Think it could be the Italian banking system?

We have seen this movie before.  Unlike the U.S. and Japan, Italy does not have their own currency.    They (like Greece) use the Euro which means the time honored and tested methods for getting out of the debt trap…i.e. inflate the hell out of the economy or debase the currency are not available.  Unlike Greece, Italy is a real country and if we have a Greek event…basta.  Think about this.  I'm going to call Massimo tomorrow with whom I haven't spoken in a while.  Poor Massimo is involved in a rather messy divorce…not his…and has been out of action for a while.  Hiding, I am told.  Private mobile numbers are a wonderful thing.  Oh, I also got a first hand report of the goings on in Argentina.  If I didn't know the reporter I wouldn't believe it..


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