Italy beggared

If you glanced at Ambrose Evans-Pritchard’s column today (The Telegraph), you would have felt your blood pressure rise.  What an absolute shocking graph – with data that would make most central bankers and knowledgeable pollies sick with worry.

The graph shows that Italian M1, M2 and M3, all measures of money supply, at the end of last year were all negative.  In fact severely negative.

A E-P calls this horrendous; and that Italy is forced into this position, criminal.  And I agree.  He superbly summarises in one sentence the entire scope of the problems and causes of the Euro crisis  “This is a direct result of the misguided pro-cyclical austerity polices imposed by Angela Merkel and the ECB – the infamous Trichet letter – without offsetting monetary and exchange stimulus.”

As an international investment banker, if a client sought advice about investing in Italy, I would say “never”.  It was renowned as a wholly insider traders market [what ever the assets or market or region] and lawless.  It was impossible to obtain all the relevant information required for a successful investment – that is – to make a fully informed investment decision.  It was the only country about which I had this point blank refusal to deal.

A little over a week ago, Confesercenti (a prominent employers association in Italy) released a report outlining how the mafia is now the country’s biggest business, including with cash reserves of 65 billion Euro.  The Telegraph outlined all the horrific details.  And this goes to the heart of why I would never deal in Italy.  The mafia, who is now gobbling up legitimate assets by the truck load, on the cheap, at the expense of the local populace.

Also railing against the country, is Ms Merkel and her cohorts:  Dumb and dumber!!  She actually praises Italy publicly for implementing its tough austerity reforms;  that we know are driving the country's assets into the arms of the mafia at a faster pace than any other strategy / policy could.  

Or maybe she and Sarkozy are keen to buy up Tuscany on the cheap for themselves. 

This austerity policy exercised in the EU – to crush everything so that in the end it is forecast everything comes out okay  - has been definitively disproved as a policy on numerous occasions.  That statement can be confirmed by back testing:  no other countries has successfully done this.

In Asia during the late 1990’s crisis, the Asian crisis as it became known, several countries were forced into a similar horrific austerity policy by the World Bank, or was it the IMF, before they would receive a bailout.  It crushed the economies, the people, and heads of governments (think Suharto) and Indonesia, Thailand and the Philippines are only now really gaining traction.  More than a decade later.

Malaysia could see that the cost to the people would be too harsh, and effectively closed its borders, implemented capital controls,  and told the IMF and its austerity policies to f-off.  How the world leaders jumped up and down spitting fire.  Its recovery was faster, its people less distressed, and its international standing returned to its former glory.  Indeed it had only one year of GDP contraction.

Sarkozy and Merkel could learn from Asia.  But they won’t.  Elitism at its finest. Instead they will beggar the Italian population, hand their assets to the mafia, and have cheap holidays.  Poor Italy!!