News commentary and predictions of political trends and what the future holds

Italian Left Lurch

February 27, 2013

Twenty five percent of the vote in Italy went to a party that want an exit from the EU and a return of the Lira. The Monetary Madness continues apace. When a country could inflate away its debts and then revalue again after it had cleared its path back to being an attractive place to spread into some of ones’ investment risks. As part of a common currency they can not con each other in this way – they have to borrow to cover the shortfalls that stem from corruption in the political class. Italy has rejected austerity but the 25% is not a protest vote. It is a game changer. It is a kick in the face of the EU. It may be fatal.

However, if the PIGS were to leave the EU, they could form their own trading bloc – one hopes they call it SPIG rather than PIGS or GIPS or the less pronounceable IGPS – they would then be able to inflate their way out of their primary problem, together.  And then they could then rejoin the EU as a block and create economic treaty zones, consider an example set of economic zones:

  • Central EU (Germany, France, Belgium, Luxembourg),
  • South EU (SPIG),
  • Eastern EU (on or adjoining the Eastern border),
  • Northern EU (Scandinavia, Denmark, Holland, UK)

Each part of the EU has an exchange rate balancer, so if they want to devalue, they can by negotiating revaluation elsewhere.  The four zones have floating exchange rate mechanisms with each other relative to capital value.  So any shift of liquidity between the zones has its economic effect.

Monetary conditions are created by a mechanism like the trading of bonds (not cash) between the Super Governments – here are a group of talented long range analysts can set the degree of valuation (this model may in effect be five currencies), the democratically preferred flavour of financial control and regulation levels that at least disallow fantastic risks with people’s pensions that maybe once paid off but now wear away at value.  Perhaps Super Governments have no other function.

Each bloc contributes to a common currency pool and sells bonds to it to maintain an economic state of relativity.  However something like that may or may not work it should be understood that the awareness of very different political system is required.

Europe without a central federal body probably leads to too many demands for regulation being imposed in the wrong markets as well as the more significant, in body count at least, the absence of regulations that would have prevented disasters evaporating vast tracts of wealth in an instant.  Such an ephemeral quality wealth can turn out to be. Protecting it irrationally may backfire.

The central purpose is to introduce long range capital increases where they are needed. The absence of any Government led stimulus or infrastructure corrections that long range planning needs to consider in its calculation of growth.  You can squeeze an orange once, but a healthy tree means more future oranges and you better have the infrastructure to squeeze them.    

“a far less great Britain struggling with a mere percentage of its economy left yet more people to employ and an inability of the state to collect fair taxes”

The apparent Tory creed of demanding tax fairness, while protecting the tax avoiders who support them, will seem shallow as the record shows a far less great Britain struggling with a mere percentage of its economy left yet more people to employ and an inability of the state to collect fair taxes means it stubbornly refuses to finance progress. Italy may serve to push the EU into progress and reform the lumbering beast.

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