ITALY EXIT IS NOT LIKE BRIT EXIT …WHY?
Sunday the Italian EXIT tribe won an enormous victory. The last PRO EU leader resigned. New leaders will be ITALYEXIT LEADERS and the voters agree. Why?
Italy is not like the Brit Exit. England was always a wait and see on the EU concept anyway. They always kept their own POUND STERLING the backup money of the world behind the US DOLLAR. They never used the EU at all.
Italy was one of the founders of the of the TREATY OF ROME agreement the foundation of the EU in 19567. Italy was a founding EU member and its most unifying. Over time all this has eroded.
Italy has lost 25% ( its heart and its soul and its backbone ) of industrial production to other nations under the EU. The nation is in a recession ( economic contraction ) that has gone on for 15 years. The nation suffers 40% youth unemployment. A majority of Italians now see the advent of the EU as a country wide DEPRESSION for their nation. They want a future and the future is the Italian currency coming back and the EU being rejected. They want out of the EU.
Those forces that united to secure the enormous win last weekend, are now more united to secure an Italian exit from the EU. Will that move be too late however? Why?
The Italian financial system is on life support. The third largest bank unable after the vote to secure almost 100 billion in new equity capital, will default on its loans. This will require state support. But other banks are right behind them. The Italian Government is on life support. It borrows over 200% of what it spends. It has done so without cutting back to get into the BLACK from the RED INK for decades. The pile of debt – the DEBT BOMBS the DEBT SUPER BUBBLES are financial system abuse. In economics, such abuse can never go on FOREVER.
The time is reaching the point of maximum elasticity. The DEBT BOMB goes off when new money can not be found to pay old money – a legal national PONZI scheme.
As it says in Alice In Wonderland…..THE TIME HAS COME….here here the TIME HAS COME.
We believe Italian banks will now have two forces working upon them. We believe the same forces will go to work on the nation itself. Both forces are fatal to Italy. As in now hope. Looking at economics only and nothing else.
First investors will run on the banks when they need money the most. They will be unable to secure new money on any terms they could afford. If they take the money on terms they can not afford the result just kicks the debt can down the road a bit a tiny bit of time.
As the RUN on the banks takes place the creditors will raise rates for all new money. The banks can’t pay the new rates. They must default on old loans and in 2017 those defaults begin contagion, they upset the entire system triggering full panic in markets globally.
Digitally Contagion causes SUPER CRASH world wide.
Bailing out the banks is impossible because Italy is itself like the banks and stretched to the breaking point in a mountain of bad debt. Italy will have a further flight of capital out of the nation, sinking tax revenue, blowing up unemployment, as the forces of economics go to work.
- The EU has plunged to a 20 month low. The cost of everything in the EU just rose and by a lot.
- The value of the EU is plunging raising the cost of EVERYTHING.
- At the worst possible time.
- The Italy economy will run out of cash to operate.
- Italy will default.
- As its banks fail.
- Bailing out Itlay is like Greece was an ant shouting from the grass in the valleys to Mount Everest in the DISTANCE – ant’ t no way the IMF can do it.
The EU can’t do it.
I’ve been saying for weeks – that the Italian vote is the most important next ECONOMIC VOTE of our century. We predicted the loss. We hoped it would not happen. For economic reasons and for the well being of Italy. The public in Italy does not understand the ECONOMIC ALPHABET and what is good economics is not properly weighted in such voter wars. Information is so precious and important.
We feel the economic forces of long-term system abuse have now come to rest in Italy with China not far behind. All the KINGS HORSE AND ALL THE KINGS MEN CAN SIMPLY NOT PUT ITALY BACK TOGETHER AGAIN. Financially.
Next enter the age dynamic. There is almost 50% youth unemployment. There is a massive Muslim population explosion from EU migration policies – itself another voter driver for EU exit for Italians who fear to loose their culture. Who wouldn’t?
Italy has the oldest and most rapidly aging population. In the other 50%, the % rated to elderly who require social services such as pension medical and so forth is heavily weighted without historic match economically. Said another way the revenue of the state of Italy is plunging and will drop out entirely in 2017. The bad debt burden is soaring and is not sustainable – can not be repaid from declining income.
The death spiral of CAPITAL FLIGHT – plunge in currency value – plunge in state revenue – plunge in economic activity and growth – added to uncertainty of an almost certain ITALIAN EU EXIT means – the EU itself will not survive – it can’t without Italy.
As Italy defaults and moves into system-wide contagion what happens.
NO ONE KNOWS.
How likely is all this?
TOO LIKELY to not consider it seriously?
What can be done?
Italy system reform. Without that ….nothing can be done.
As system reform is now unlikely — consider NOTHING CAN BE DONE as the outcome.
Knowing this – what do you think SUPER MONEY – SOVEREIGN WEALTH FUNDS – SHADOW BANKING – 100’s of trillions will DO? Will they move to protect themselves before the next software blip? Are they running in capital flight out of Italy NOW to cut their loss and protect capital? Who would NOT DO THIS knowing what we wrote here?
This becomes economically the FINANCIAL AVALANCHE. The Financial Perfect STORM washing away all safe harbors in Italy. A BLOOD BATH. A real depression as their recession slides into full-on economic depression and collapse.
We reported this weekend hour inflation from such collapse and capital flight out of VENEZUELA has resulted in backpacks full of their currency to pay for a breakfast at a restaurant. The cost of which will rise 100% next month with more than 1,000 percent annual inflation. Their solution – move from the 100 dollar note in their currency to 20,000 notes they printed this weekend so the higher price does not require a backpack until NEXT YEAR.
Really? I mean really? This is how you fix it?
Italy is right behind.
My fear for Italy is capital flight now that the vote is in. Untold billions running out of the Italian bet and the forward Italian BAD ECONOMICS. A DEBT ECONOMY. Where the lenders are raising prices to levels the nation of Italy itself can no longer afford to pay. Then it is GAME OVER.
I think it is looking ahead.
GAME OVER For Italy.
As I said last night – I’m so sorry for all my friends and clients in Italy.
Sometimes market forces beyond your control defeat your own plans. I will host a conf call to tell Italian business owner CEO’s WHAT TO DO to protect themselves. I will teach that topic at CEO SPACE in Orlando Dec 13th. If you are an Italian business OWNER and you want to know what to DO to protect yourself – and you speak English – attend CEO SPACE DEC 13th and we’ll map out a safer future for you.
Berny Dohrmann – Keeping a light on just for you