Is Italy dying

[RuleNumberOne]

Take a look at the working age population graphs for the US and Italy.

 

US:  https://fred.stlouisfed.org/series/LFWA64TTUSM647S

 

Italy: https://fred.stlouisfed.org/series/LFWA64TTITQ647S

 

Italy GDP is lower than 2007. Debt to GDP as high as ever, even with negative rates.

 

Their quarterly GDP growth rate figures: 0.1, -0.1, -0.1, 0.1, 0.1, 0.1, 0.1. They have the highest amount of sovereign debt issued in Europe. Eurocrats must have told them to fake their GDP growth rate reports.

 

Will Italy die rather than leave the Euro? They want to be part of the Euro so badly that they are willing to kill themselves rather than leave? If they do leave the Euro, financial markets will crash.

 

 

 

[Sunrider]

Take a look at the working age population graphs for the US and Italy.

 

US:  https://fred.stlouisfed.org/series/LFWA64TTUSM647S

 

Italy: https://fred.stlouisfed.org/series/LFWA64TTITQ647S

 

Italy GDP is lower than 2007. Debt to GDP as high as ever, even with negative rates.

 

Their quarterly GDP growth rate figures: 0.1, -0.1, -0.1, 0.1, 0.1, 0.1, 0.1. They have the highest amount of sovereign debt issued in Europe. Eurocrats must have told them to fake their GDP growth rate reports.

 

Will Italy die rather than leave the Euro? They want to be part of the Euro so badly that they are willing to kill themselves rather than leave? If they do leave the Euro, financial markets will crash.

 

I take it from your statement that you don‘t live in Europe. Also, you seem to imply that it is the Euro which is responsible for Italy‘s malaise. That’s debatable.

 

In the words of Robin Williams “I made you short?” :)

 

Clearly it doesn’t help to be in fiscal system which doesn’t allow you to devalue when your productivity sucks, and yoking countries together this way is the original mistake of the Eurozone - but there is more to Europe than the Euro, and that’s what Italy (and many Brits, actually, are after).  What you’re seeing in this chart has more to do with outward migration as low growth means whoever can go and work elsewhere does. Where do they go? To other parts of Europe, mostly ... which was the idea of the ‘free movement of labour’ principle enshrined in the EU common market. The problem is that Italy’s productivity in many sectors is comparatively low, they have a lot of red tape, etc., etc.

 

All of these things wouldn’t magically disappear if they left the Euro (which also means they’d have to leave the common market and start negotiating bilateral trade agreements). Of course, they could then devalue, but that doesn’t fix the structural issues.

[scorpioncapital]

I think there was talk of a parallel currency using tax receipts in Italy. It's an interesting idea. The European countries that do not use the Euro feel better to me. Not sure why Greece did not go off the currency, maybe they thought even with austerity and deflation they are better off than a severe currency devaluation? I am not so sure.

 

[Spekulatius]

I think there was talk of a parallel currency using tax receipts in Italy. It's an interesting idea. The European countries that do not use the Euro feel better to me. Not sure why Greece did not go off the currency, maybe they thought even with austerity and deflation they are better off than a severe currency devaluation? I am not so sure.

 

Greece is booming right now, FWIW.

Italy has structural problems that existed before the Euro was implemented. Lousy demographics, inefficient institutions and low productivity  are the main one that come to my mind. The grip of the Mafia on half the country didn’t help either, although they have improved in this regard.

 

All these will, when they would exit the Euro zone. Italy is actually the main benefactor of the low interest rate policy. If they exit the Euro, the  interest rates for new debt as well as for the business within would go way up.

[RuleNumberOne]

Interesting. That makes the debt-to-GDP problem worse because we need people working and paying taxes in Italy so that the sovereign debt can be paid.

 

Do you find it suspicious that the last 7 GDP reports for Italy reported growth of 0.1%, -0.1%, -0.1%, 0.1%, 0.1%, 0.1%, 0.1%? How can GDP growth get fixed at 0.1%?

 

If Italy cannot pay its debts, the European banking system gets wiped out. French banks own hundreds of billions of euros of Italian debt.

 

Take a look at the working age population graphs for the US and Italy.

 

US:  https://fred.stlouisfed.org/series/LFWA64TTUSM647S

 

Italy: https://fred.stlouisfed.org/series/LFWA64TTITQ647S

 

Italy GDP is lower than 2007. Debt to GDP as high as ever, even with negative rates.

 

Their quarterly GDP growth rate figures: 0.1, -0.1, -0.1, 0.1, 0.1, 0.1, 0.1. They have the highest amount of sovereign debt issued in Europe. Eurocrats must have told them to fake their GDP growth rate reports.

 

Will Italy die rather than leave the Euro? They want to be part of the Euro so badly that they are willing to kill themselves rather than leave? If they do leave the Euro, financial markets will crash.

 

I take it from your statement that you don‘t live in Europe. Also, you seem to imply that it is the Euro which is responsible for Italy‘s malaise. That’s debatable.

 

In the words of Robin Williams “I made you short?” :)

 

Clearly it doesn’t help to be in fiscal system which doesn’t allow you to devalue when your productivity sucks, and yoking countries together this way is the original mistake of the Eurozone - but there is more to Europe than the Euro, and that’s what Italy (and many Brits, actually, are after).  What you’re seeing in this chart has more to do with outward migration as low growth means whoever can go and work elsewhere does. Where do they go? To other parts of Europe, mostly ... which was the idea of the ‘free movement of labour’ principle enshrined in the EU common market. The problem is that Italy’s productivity in many sectors is comparatively low, they have a lot of red tape, etc., etc.

 

All of these things wouldn’t magically disappear if they left the Euro (which also means they’d have to leave the common market and start negotiating bilateral trade agreements). Of course, they could then devalue, but that doesn’t fix the structural issues.

[scorpioncapital]

I am suspicious of the claim that Greece is booming. But like any near death experience, it usually feels better, but only because the comparison is against death, so the standard is really low.

[no_free_lunch]

I think the EU members in general are dying. Frances GDP is also stagnant over the last decade.  Maybe Germany and the Nordic countries aren't as bad off but I'm not sure that story is done.

 

From an investment perspective I would stay far away from Italy. I read that stock market returns there were some of the lowest in the world during the 20th century. If things are getting worse then investors are that much more out of luck.

 

To add to your demographic argument they have one of the lowest birth rates in the world.  I am not going to sugar coat it, it will just get worse.

[Sunrider]

I think the EU members in general are dying. Frances GDP is also stagnant over the last decade.  Maybe Germany and the Nordic countries aren't as bad off but I'm not sure that story is done.

 

From an investment perspective I would stay far away from Italy. I read that stock market returns there were some of the lowest in the world during the 20th century. If things are getting worse then investors are that much more out of luck.

 

To add to your demographic argument they have one of the lowest birth rates in the world.  I am not going to sugar coat it, it will just get worse.

 

Well ... maybe.

 

Though there are many Italian companies which are, in fact, not Italian in so far as their revenue mostly comes from elsewhere (RACE). There are also those where even in a low growth environment may have a reasonable chance at decent returns from structural changes (Telecom Italia - split of network).

 

... just a thought.

[mjm]

have seen where net worth of individuals are actually on average a fair bit higher for Greece and Italy versus Germany, but have not checked recently.  Maybe house ownership in Germany is lower.

[Spekulatius]

have seen where net worth of individuals are actually on average a fair bit higher for Greece and Italy versus Germany, but have not checked recently.  Maybe house ownership in Germany is lower.

 

Yes, home ownership is Italy is quite high and low in Germany (and even lower in Switzerland) and this is a huge impact on net worth.

 

The balance sheet of Consumer households in Italy is actually in a good shape.

[petec]

Not sure why Greece did not go off the currency, maybe they thought even with austerity and deflation they are better off than a severe currency devaluation?

 

They did not decide that. It was forced upon them by the various EU institutions, which as usual gave not one f**k for Greece's domestic democracy, which explicitly voted against austerity and was overruled. Terrifying.

 

Greece is not booming. It is growing, but only after a decade of depression.

 

And BTW "yoking countries together" this way was not the original mistake of the Eurozone. It was entirely deliberate, the intention being that the inevitable crisis would provide an excuse for fiscal unity, something that the peoples of Europe would never accept any other way.