Why Italy Could Be the Epicenter of the Next Financial Crisis

Maybe someone in particular could sign the Paris agreement, not naming names or anything....

Things will still be bleak for various species and the poor...but I expect climate change will make many immensely wealthy

Consider what happened last time the treaties forbade bailouts:

https://www.reuters.com/article/us-france-lagarde-idUSTRE6BH...

“We violated all the rules because we wanted to close ranks and really rescue the euro zone,” Lagarde was quoted as saying.

“The Treaty of Lisbon was very straight-forward. No bailout.”

The summit approved a two-sentence amendment to the treaty at Germany’s behest to permit the creation of a European Stability Mechanism to handle financial crises from 2013.

It's a pretty dire record though. I think that it's easy to argue that where there have been positive results that's mostly by accident. The UK is the best example of this - there was an IMF rescue and liberalisation but also an oil discovery which recapitalised the commercial base of the country and allowed an infrastructure building program.

Says who? The economists who did not even seen the financial crisis coming and were clamoring that the real estate market was solid and totally fine even as late as 2007??

Just wondering...

> what would have been the alternative?

An early writedown of some debt and extension of other, enabling the economy to return to growth and service the remaining debt.

Re 1.: Pension funds and other institutional investors invest in equity and debt world wide, taking into account risk and return. Sometimes they make mistakes (or even not - sometimes the dice fall badly), and an investment goes sour. That's the market at work. In this case, however, European put massive amounts of money into Greece that were not used to prop up the economy, but to bail out investments by German and French banks. So, basically a transfer from the European tax payer to some banks.

2. It would make imports very expensive, but free up the domestic economy and make it more competitive.

"Optimum currency area" describes what's necessary for a currency union: homogeneity wrt external shocks (not the case in the EU), high factor mobility (limited in the EU, due to language/culture), or internal transfer payments.

In my view, Europe sat down for a nice dinner (10 years ago with the introduction of the Euro) in a restaurant and enjoyed it over a decade (with massive growth financed by cheap debt in many "peripheral" countries), and when the bill came (oops, we need these internal transfers now) - refused to pay. Shameful.

You are making the (in my opinion wrong) assumption that Greece default has been avoided instead of delayed.

There is no way Greece can pay that, the only difference is that the money is now owned to international institutions instead of French and German private banks.

You make also the assumption that a Greek government with it's own floating currency would follow a pro-cyclical fiscal policy, like the one force on them now, instead of a sane one.

1. I don't know anything about the Netherlands pension system, but I doubt is based in only private institutions. If they have a public system, the dutch pensioners could receive whatever the Netherlands decide through its democratic institutions, only constrained by the real resources available to the Netherlands. Of course, being an Euro country, that could be decided outside of Netherlands.

2. A country that works with its own floating currency don't need to borrow its own currency. So the problem would not be money.

The biggest problem for a Greece outside the Euro, would be that they are very dependent of imports. In order to fix that you have to develop an industry. In order to develop an industry you need investment and industrial policy. That's it: the opposite of what is being forcing now in Greece.

and even then, they will still have to deal with the fallout of those who took the bait (or "elected" people who took the bait on their behalf) and will be pissed… as we're seeing now all over the world today, and these were supposed to be the good times lol

/me sighs

https://www.rstreet.org/2016/02/22/countries-dont-go-bankrup...

https://en.wikipedia.org/wiki/List_of_sovereign_debt_crises

https://www.bankofcanada.ca/wp-content/uploads/2016/06/r101-...

In any case, defaulting on debt is completely natural. It is what's part of how the system is supposed to work. If lenders didn't pay attention, out of lack of knowledge or willfully, and the debtor cannot repay, that's it. There has been a very successful campaign that strengthened the side of the lenders, big and small, over many decades - not necessarily consciously and deliberately (not a concerted effort). It's been successfully made into a moral issue.

Anyway I would suggest to focus on long term growth strategies, simplification of the business, incentive for companies growth. Our economic system is formed by too many small medium companies that simply cannot compete anymore in the global market.

> At least they're not saving pointless banks

That would be the same pointless banks who allow people to take out pointless mortgages to live in pointless houses, or to finance pointless businesses who pay pointless salaries.

I did not like the way the world got out of the 2008 crisis (I would have nationalised the shit out of the EU/US banking sector, it was a golden opportunity to make history), but letting huge banks fail would have been world-ending.

> Universal Basic Income is deemed necessary [...] citizenship income won't work the same way

Then why do you mention it to justify a Blair-style "workfare" law that has nothing to do with UBI (for one thing, it won't be universal, which is kinda the point)? Beyond the propaganda, there will be no UBI - it's just a reshaping of unemployment benefits to make certain areas of the country electorally beholden to a certain party, like it happened in the "good old days".

Quoting a holy text, "you were supposed to bring balance to the Force, not leave it in darkness".

> I don't trust the markets, the finance sector or the economic system to change that

On that I agree, but the realities of the XXI century are that the system is bigger than any single country, and solutions must be co-operative or won't be. I trust demagogues even less than bankers.

I have no idea what you mean by this.

Providing UBI through debt financing is a recipe for disaster.

Someone, somewhere has to earn this "income" so you can't just magically produce it out of thin air, if the Italian tax base can't service the current debt then how is it supposed to service further debt to provide a "citizenship income"?

I hope they never abolish this system. Fund-based systems in the end work the same but add market inefficiencies and risks.

While we are at work on these kinds of solutions, I propose we just put immigrants in cryogenic sleep. It’s probably better than I definitely holding people on desolate islands.

Also the irony is rich, given than Australia was the desolate place to dump criminals.

If you live in a Silicon Valley bubble where the 'customer is the product' and all you have to sell is advertising space then you might not understand this.

Adding images to this website does not necessarily undermine the 'audit' metrics. Clearly this has to be done with sensibly sized images otherwise those metrics will be affected negatively.

Small to medium sized real businesses do not necessarily need Google Analytics with people on the payroll to troll the rest of the company with petty 'SEO demands'. If a company has established relationships with distributors or if products are supplied on an 'OEM' basis to a handful of partners then the website need be no more than a glorified 'contact us' page.

Server side analytics are fine for such an internet presence. In some ways better as there is no need to have a silly 'cookie' notice.

You have a very narrow idea of business value if it is all about stalking your potential customers and ramming adverts that they did not want down their eyeballs, wasting their time and bandwidth in the process.

- Italy used to handle Europe's low end manufacturing, like textiles, thanks to our relatively inexpensive wages and nice location. This all disappeared in the last 15 years with production moving to Asia, you can say we got outcompeted at our own game. Here is one example of one such factories in ruin (https://it.wikipedia.org/wiki/File:Valdagno_Marzotto.jpg) I saw last week. That thing is massive.

- You heard this before, but taxation is huge. It's one of the reasons I left and it is especially depressing given the next to nothing we have to show for it. We do have a corrupted political class we can't seem to get rid of. I didn't really follow but it seems that in the process of replacing it we ended up with a worst evil, that is populism. I guess stealing a bit from everyone for your own profit is a thing, stealing from future generations for feel-better political manoeuvres is even worse.

- The huge divide from north to south. It's a long story, but if you ask the north they will tell you the south is spending all their taxes, if you ask the south they will tell you the north conquered them and stole all of their wealth 200 years ago. The region I'm from, Veneto, used to be one of the wealthiest in Europe until very recently. The big majority of our taxation ended up being redistributed in the south, again, with nothing to show for it thanks to corrupted politicians, mafia and I will add, a general disinterest in improving one's condition due to the very nice weather and the very little you have to do in life to live comfortably in the south. Which I hope doesn't sparkle any debate, it's something I believe you can observe in the whole of Europe taking a train from Sicily to Norway.

- English. We don't speak it. If we do it's just a notch above barely. With the internet and international commerce that is holding us back more than you would expect. I wish we had cartoons and movies with no dubbing on national TV.

On the positive side, one Indian friend of mine jokingly told me his parents still buy textile machines from Italian companies, which is a nice example of the kind of industries that managed to survive in Italy to this day.

If the Italy of the year 3000 is a wasteland without buildings or industries, never mind how much money have you saved, the not-yet-born Italians will be in problem.

If the Italy of the year 3000 is a highly developed country, with futuristic robots and star trek replicators, they will just have a good life.

Sometimes, with all this chat about debt and earnings we forget what is really important.

Do you want the future Italians have a good life? Invest in infrastructure, technology and knowledge and don't do the opposite trying to "save" not-yet-born people money. That should be obvious.

Unless you are stuck on some axiom that what's good for the companies is good for… humans.

I think it's fairly self evident at this point that you've got people, you've got companies, you've got capitalism as a whole. It's a pecking order and they are somewhat to extremely antagonistic. People, as the most powerless entities in the equation, are very much on the way out.

But we can't so have to deal with what is in front of us right now.

https://en.m.wikipedia.org/wiki/Latin_Monetary_Union

But the levers of political power were, then as now, in hands guided not by stale history, but by fresh opportunity for self-advancement.

EU VAT accounting is actually fabulous for real goods: intra-union transactions are VAT-free, so each state can levy whichever rate they prefer on the final sale. Everyone is happy and there is less red tape.

They fucked up for digital goods and services because the model simply does not map well to that domain - the internet has no border. Politicians felt they had to make a choice between losing VAT income altogether (which is what was happening before, with companies tactically exploiting low-VAT countries) or creating some friction for digital businesses. They picked the most rational option.

In reality, it's a false dichotomy, and everyone knows it. The real way out is a simplification where that tax is centralized at federal level; but it requires a huge amount of political capital, that the current generation of European politicians is completely incapable of generating on their own. At some point, someone will run in France or Germany on this platform of simple, flat VAT rates on digital income across the EU, accumulating to an unified EU treasury that can then be used to further generate income; they will win, and it will come to pass.

In the future, when we're setting up even larger multinational organisations (even a world government), EU will be a good example of what not to do.

Er, no. Commission and Council are both legislative and executive at the same time. The oversight organ is Parliament.

A lot of the of the ill-will against the EU setup comes from this non-traditional arrangement that betrays Montesquieu for the good of efficiency at scale: it's so hard and slow to write laws in national parliaments, that EU governments decided the model wouldn't work at continental level. You can look at the (in)efficiency of comparable bodies (US Congress and Indian parliament) to see the problem in action every day.

So multiple generations of EU politicians decided it would be easier to take hard decisions in a small room (Council), then leave it to the bureaucrats (Commission) to implement them. When the model was criticized for being undemocratic, they begrudgingly agreed to have a Parliament with veto powers. But democracy, once started, is a rolling boulder; so the role of EUParliament has grown with every election. The Commission cannot steamroll measures anymore, so EUP assumed a de-facto legislative role too. This is Good in historical terms and can only get better with time. Already the composition of the Commission has moved from a compromise brokered on purely-ethnic lines by national governments, to a body that also has to reflect the political inclinations of the sitting Parliament, lest they get rejected. Parliament will not rubber-stamp anymore.

The problem is that some elements of EU politics continue to be insulated from Parliament. Fiscal matters in particular, where states are completely unchecked, must be tied to Parliament in some way. Until that happens, demagogues will have an easy way to misdirect, talking of "Council" and "Troikas" as some unelected bodies when they are simple smokescreens for national governments to hide behind. It has to be corrected.

From a history-buff perspective, the current era is an exciting time: the continent is basically rewriting its constitutional asset in real-time. It's the sort of sea-change that happens once every 200 years; like a Vienna Congress or US Constitutional Convention, but spread over decades.

> Yes, a highly popular measure inside Europe, even by tech people who are affected by it.

I beg to differ. 'Controversial' is more like it. There are some who are in favour of GDPR but there are also those - myself included - who consider it well-intentioned but badly executed.

You conveniently kept out the copyright one.

No, but big lobbyists do, so there we go.

That's an American slogan and approach, and maybe with their policies of wealth distribution, it's a legitimate target. In Europe the resentment against the very rich is usually reserved for those who dodge taxes.

> the "common" (i.e. actually working) population.

The common, actually working, population usually has pension build up and savings. Try asking those people who formerly had highly volatile currencies how they feel about having those in Euro.