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

AC

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

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
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Latkes
Latkes

Looks like Italian government is not happening and new elections might be be next.

Tony_CA
Tony_CA

I hate to repeat Ad nauseam. Italy is not Greece. It's economy is far larger. It simply can't be ring fenced. EU is thus becoming extremely fragile. As much as Merkel and Dragni keep trying to buy time it will ultimately not matter. The dept levels are simply to large coupled with fact the Trump is essentially openly attracting Germany over it's fuel sources. Germany is itself becoming politically unstable. Remember when folks thought the Soviet Union was here to stay.

caradoc-again
caradoc-again

“If there’s not the OK of Berlin, Paris or Brussels, in Italy a government cannot be formed. It’s a folly, and I ask the Italian people to stay close to us because I want to bring democracy back to this country,” Salvini told reporters. Questions are now being asked of the legitimacy of Italian institutions and it's likely a technocrat government will be installed as a temporary measure. Should IMF become involved expect their Euro bias to show through - run by the French.

caradoc-again
caradoc-again

Meanwhile It's kicking off in Spain, possible election. Rajoy days numbered.

caradoc-again
caradoc-again

Germany moves, Italy folds, game over.

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