Reader From Italy Chimes in on the "Minibot" Parallel Currency Idea

Reader "AC," whose emails I have on occasion posted previously, chimes in events in Italy.

Reader AC writes ...

Hello Mish

Regardless of anything else: Italians are masters in finding smart ways to circumvent rules. There is even an adage in Italy regarding this.

On that basis, I would not be surprised if at one point in time, someone in Brussels or Frankfurt will realize too late precisely what is happening.

One of the key points is that the debt of Italian state vs corporates is huge Likely, rather than waiting again and again to be paid, corporates may resolve themselves to accept MiniBots if they have reasonable expectation they can exchange them with Euros or use them against any debit to the governement in a close future.

It is much better than waiting for a bank loan that will never come or paying huge interest for credit lines.

So it is not unlikely that the minbot idea will gain momentum. Once it is fully in circulation, even without any legal obligation to accept it, who knows what can happen? Everything is possible, from the worst scenario to the best scenario.

It sounds like a way to "nationalize" public debt slowly. Nothing prevents issuance of minibots to pensions or for social subsidies.

From a purely "academic" point of view the experiment is interesting, but millions of real lives are involved in such "experiment" and if it ends badly it will be really catastrophic.

Best Regards


That email was in response to a couple of previous posts of mine.

  1. Italy’s New Prime Minister Puppet: Time to "Ringfence" Italy? MMT to the Rescue?
  2. Economic Recovery in Italy: NY Times vs. Alhambra Investments' Zombification

The problem for the Eurozone and the EU is that Italy can bring about the minibot slowly enough that it holds value. Then once it is accepted, Italy can escalate issuance.

AC noted that "everything is possible".

Perhaps, but one thing is certain: Germany will end up paying big time one way another.

Germany gets to decide between debt mutualization or a breakup of the Eurozone and Italian default on Target2 imbalances. The only other possibility that comes to mind is the ECB prints enough to backstop Target2.

Mike "Mish" Shedlock

Comments (27)
No. 1-25

The "mini-Bot" is a fiscal currency, or put another way, a monetary version of a tax credit. Its issuance will mean that Italian budget deficits will go to the stratosphere (in flagrant violation of Eurozone Treaty Rules) - which may still be all well and good, so long as Draghi and the ECB continue to buy ever more huge amounts of Italian Government debt. The final say thus lies with the ECB. If they declare that Italian government debt (or even a portion thereof) as a result of the mini-Bot issuance is no longer eligible for ECB purchase, then the whole scheme (along with the Italian economy and bond market) goes up in smoke. This would seem like a HUGE gamble on the Italians part. I cannot possibly see them following through on this. Please correct me if I am missing something here.


Silly MMT gurus, the answer has been there all along,,,,,


Made "theoretically" possible by the ECB. If the ECB was not buying Italian government bonds hand-over-fist, the bond market (which no longer exists in the EZ) would be destroyed by this.


The bottom line is quite clearly this: Governments are inherently inclined to find mechanisms whereby they can fund existing and future expenditures. Living within your means is not something they understand nor care to give credence to.