Fed Chair Janet Yellen will deliver her inaugural monetary policy testimony on February 11 and 13. Her prepared remarks will be released at 8:30amET and the testimony will begin at 10amET. Goldman, unlike the market of the last 3 days, believes that Ms. Yellen is likely to “stick to the script” in her first public remarks since taking over from Bernanke but they look for additional color on the following issues: (1) the recent patch of softer data; (2) the Fed’s thinking on EM weakness; (3) the hurdle for stopping the taper; (4) the amount of slack in the labor market; and (5) the future of forward guidance.
Via Goldman Sachs,
1. How much does Ms. Yellen worry about the softer data?
The US economic data have disappointed since the start of the year. Following last week’s weaker-than-expected employment and ISM manufacturing reports, our US-MAP surprise index has fallen further into negative territory and our current activity indicator (CAI) has slowed from an average of 3.1% in October/November to 2.3% in December/January. But, given a number of special factors, we think this is a pothole after a much stronger-than-expected 2013H2, not the beginning of yet another swoon. More broadly, our confidence in the fundamental drivers of stronger US growth remains high and we continue to expect growth of about 3% this year. We will take note of the degree to which Ms. Yellen views the recent patch of softer data as transitory. A new set of formal economic projections is not due until the March FOMC meeting, and we expect Ms. Yellen’s message to remain broadly consistent with the committee’s December forecast of 3% growth in 2014.
2. How are Fed officials thinking about the EM weakness?
The recent turbulence in emerging economies and markets raises two questions for Fed officials. The first is whether the turmoil is related to the Fed’s tapering. As our EM Markets team has noted, we think that the EM difficulties reflect a need for significant adjustments in a range of countries in an environment of higher global real interest rates and lower commodity prices. While rising US rates–and therefore to some extent Fed policy–were a catalyst, the fundamental source of pressure lies in the domestic and external imbalances within EMs that need correction. The second question is the extent to which the EM turmoil might spill over into the United States. Given the limited exposure of the United States to the EM world, we are not too worried about adverse spillovers. Emerging economies as a group only account for a relatively small share of US exports, banking claims, and corporate profits, and the numbers decline further if we focus on the most troubled EM countries. We would expect Ms. Yellen to take a similar view but will look out for any color on these issues.
3. What is the hurdle for stopping the taper?
We believe that the hurdle for a pause in the tapering process is still fairly high. While the Committee has taken pains to note that the path of asset purchases is “not on a preset course,” a substantial change in the outlook would likely be required for the Fed to either pause or accelerate the gradual pace of tapering started in December. We think this relatively high bar has not been met. This is partly because of our interpretation of the recent dataflow discussed above and partly because, at this point, Fed officials appear to have little confidence that they can use small moves in the QE pace to fine-tune their monetary impulse. After the events of last summer, they are probably particularly reluctant to signal an increase in the pace of tapering, now that the program is on a natural course toward expiration well before the point at which the FOMC expects to hike the funds rate. The hurdle for interrupting the tapering process in response to weaker growth or lower inflation might be a bit lower, but we believe that the surprise would still need to be more meaningful than what we have seen in recent weeks. We would expect Ms. Yellen to deliver a similar message.
4. How much slack does the economy have?
One of the key questions for the US economy is how much slack remains in the labor market. The size of the employment gap appears particularly uncertain at present because it is unclear to what extent the unemployment rate is representative of the amount of slack in the labor market. On the one hand, the unemployment rate might overstate the amount of slack in the labor market because the short-term unemployment rate has already fallen significantly. On the other hand, the unemployment rate might understate the employment gap because the weakness in labor force participation is partly cyclical. While the uncertainty is significant, we see the evidence as more consistent with the latter view. Fed commentary on this issue suggests that there is a range of opinions on the committee. Former Chairman Bernanke was generally non-committal, highlighting the importance of both cyclical and structural factors (such as demographics). We would expect Ms. Yellen to indicate that a significant amount of slack remains despite the drop in the headline unemployment rate, and that more and broader labor market improvement is needed before the FOMC will consider an increase in short-term interest rates.
5. What will happen to forward guidance?
Finally, we will take particular note of any remarks regarding potential changes to the forward guidance. The most immediate question is how Fed officials think about guidance for the first rate hike now that the unemployment rate is very close to its threshold. A cosmetic adjustment to the guidance appears needed once the unemployment rate drops below 6.5%. But we would expect Fed officials to rely mainly on qualitative guidance in the near term given the apparent lack of support in the December meeting minutes for more forceful enhancements, such as reducing the unemployment threshold to 6.0%.
The other important question is whether the committee will provide additional guidance for the pace of policy normalization once the first rate hike occurs. The FOMC statement currently states that “when the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.” Ms. Yellen said in March 2013 that the committee’s current forward guidance is “not complete” because it “has not specified exactly how it intends to vary the federal funds rate after liftoff from the effective lower bound.” Ms. Yellen concluded in April 2013 that “as the time of the first increase in the federal funds rate moves closer… it will be increasingly important for the Committee to clearly communicate about how the federal funds rate target will be adjusted.”
We argued last week that an attractive approach to providing additional forward guidance in the present circumstances might be to stress the role of nominal wage growth for Fed policy. The uncertainty around the extent of labor market slack makes agreement on quantitative guidance difficult to attain. But we showed that Fed officials can, in principle, mitigate this problem by responding less to the poorly measured employment gap and more to nominal wage growth. This is true even if Fed officials care greatly about employment; the reason is that wage inflation acts as a cross check for (imprecisely measured) labor market slack. While such a policy is not perfect—as the link between wages and slack, too, is subject to uncertainty—the scope for error is lowered significantly. Ms. Yellen may therefore well indicate that wage inflation is one of the key markers for broad labor market improvement and, therefore, the committee’s thinking about the funds rate path.
Fed Chair Janet Yellen will deliver her inaugural monetary policy testimony on February 11 and 13. Her prepared remarks will be released at 8:30amET and the testimony will begin at 10amET. Goldman, unlike the market of the last 3 days, believes that Ms. Yellen is likely to “stick to the script” in her first public remarks since taking over from Bernanke but they look for additional color on the following issues: (1) the recent patch of softer data; (2) the Fed’s thinking on EM weakness; (3) the hurdle for stopping the taper; (4) the amount of slack in the labor market; and (5) the future of forward guidance.
Via Goldman Sachs,
1. How much does Ms. Yellen worry about the softer data?
The US economic data have disappointed since the start of the year. Following last week’s weaker-than-expected employment and ISM manufacturing reports, our US-MAP surprise index has fallen further into negative territory and our current activity indicator (CAI) has slowed from an average of 3.1% in October/November to 2.3% in December/January. But, given a number of special factors, we think this is a pothole after a much stronger-than-expected 2013H2, not the beginning of yet another swoon. More broadly, our confidence in the fundamental drivers of stronger US growth remains high and we continue to expect growth of about 3% this year. We will take note of the degree to which Ms. Yellen views the recent patch of softer data as transitory. A new set of formal economic projections is not due until the March FOMC meeting, and we expect Ms. Yellen’s message to remain broadly consistent with the committee’s December forecast of 3% growth in 2014.
2. How are Fed officials thinking about the EM weakness?
The recent turbulence in emerging economies and markets raises two questions for Fed officials. The first is whether the turmoil is related to the Fed’s tapering. As our EM Markets team has noted, we think that the EM difficulties reflect a need for significant adjustments in a range of countries in an environment of higher global real interest rates and lower commodity prices. While rising US rates–and therefore to some extent Fed policy–were a catalyst, the fundamental source of pressure lies in the domestic and external imbalances within EMs that need correction. The second question is the extent to which the EM turmoil might spill over into the United States. Given the limited exposure of the United States to the EM world, we are not too worried about adverse spillovers. Emerging economies as a group only account for a relatively small share of US exports, banking claims, and corporate profits, and the numbers decline further if we focus on the most troubled EM countries. We would expect Ms. Yellen to take a similar view but will look out for any color on these issues.
3. What is the hurdle for stopping the taper?
We believe that the hurdle for a pause in the tapering process is still fairly high. While the Committee has taken pains to note that the path of asset purchases is “not on a preset course,” a substantial change in the outlook would likely be required for the Fed to either pause or accelerate the gradual pace of tapering started in December. We think this relatively high bar has not been met. This is partly because of our interpretation of the recent dataflow discussed above and partly because, at this point, Fed officials appear to have little confidence that they can use small moves in the QE pace to fine-tune their monetary impulse. After the events of last summer, they are probably particularly reluctant to signal an increase in the pace of tapering, now that the program is on a natural course toward expiration well before the point at which the FOMC expects to hike the funds rate. The hurdle for interrupting the tapering process in response to weaker growth or lower inflation might be a bit lower, but we believe that the surprise would still need to be more meaningful than what we have seen in recent weeks. We would expect Ms. Yellen to deliver a similar message.
4. How much slack does the economy have?
One of the key questions for the US economy is how much slack remains in the labor market. The size of the employment gap appears particularly uncertain at present because it is unclear to what extent the unemployment rate is representative of the amount of slack in the labor market. On the one hand, the unemployment rate might overstate the amount of slack in the labor market because the short-term unemployment rate has already fallen significantly. On the other hand, the unemployment rate might understate the employment gap because the weakness in labor force participation is partly cyclical. While the uncertainty is significant, we see the evidence as more consistent with the latter view. Fed commentary on this issue suggests that there is a range of opinions on the committee. Former Chairman Bernanke was generally non-committal, highlighting the importance of both cyclical and structural factors (such as demographics). We would expect Ms. Yellen to indicate that a significant amount of slack remains despite the drop in the headline unemployment rate, and that more and broader labor market improvement is needed before the FOMC will consider an increase in short-term interest rates.
5. What will happen to forward guidance?
Finally, we will take particular note of any remarks regarding potential changes to the forward guidance. The most immediate question is how Fed officials think about guidance for the first rate hike now that the unemployment rate is very close to its threshold. A cosmetic adjustment to the guidance appears needed once the unemployment rate drops below 6.5%. But we would expect Fed officials to rely mainly on qualitative guidance in the near term given the apparent lack of support in the December meeting minutes for more forceful enhancements, such as reducing the unemployment threshold to 6.0%.
The other important question is whether the committee will provide additional guidance for the pace of policy normalization once the first rate hike occurs. The FOMC statement currently states that “when the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.” Ms. Yellen said in March 2013 that the committee’s current forward guidance is “not complete” because it “has not specified exactly how it intends to vary the federal funds rate after liftoff from the effective lower bound.” Ms. Yellen concluded in April 2013 that “as the time of the first increase in the federal funds rate moves closer… it will be increasingly important for the Committee to clearly communicate about how the federal funds rate target will be adjusted.”
We argued last week that an attractive approach to providing additional forward guidance in the present circumstances might be to stress the role of nominal wage growth for Fed policy. The uncertainty around the extent of labor market slack makes agreement on quantitative guidance difficult to attain. But we showed that Fed officials can, in principle, mitigate this problem by responding less to the poorly measured employment gap and more to nominal wage growth. This is true even if Fed offi
cials care greatly about employment; the reason is that wage inflation acts as a cross check for (imprecisely measured) labor market slack. While such a policy is not perfect—as the link between wages and slack, too, is subject to uncertainty—the scope for error is lowered significantly. Ms. Yellen may therefore well indicate that wage inflation is one of the key markers for broad labor market improvement and, therefore, the committee’s thinking about the funds rate path.
East Asia is becoming, in the language of international relations theory, “bipolar.” That metaphor, from magnetism, suggests two large states with overlapping spheres of influence competing for regional leadership. The Cold War was a famous global example of bipolarity. Most states in the world tilted toward the United States or the Soviet Union in a worldwide, zero-sum competition. Although analysts have hesitated for many years in applying such strong language to East Asia, this is now increasingly accepted. A lengthy twilight struggle between China and Japan, with U.S. backing, seems in the offing.
Until recently, Asia was arguably “multipolar”—there was no one state large enough to dominate and many roughly equal states competed for influence. China’s dramatic rise has unbalanced that rough equity. China is now the world’s second largest GDP. Although its growth is slowing, it is still expanding at triple the rate of the U.S. economy and six times the rate of Japan’s. By 2020 China is predicted to be the world’s largest economy. Its population, 1.35 billion, is enormous. One in seven persons on the planet is Chinese. Were China’s GDP per capita to ever reach Japanese or American levels, its total GDP would match that of entire planet today. These heady numbers almost certainly inspire images of national glory or a return to the “middle kingdom,” in Beijing. They help account for China’s increasingly tough claims in the East and South China Seas.
Until recently, China pursued a “peaceful rise” strategy, one of accommodation and mutual adjustment. This approach sought to forestall an anti-Chinese encircling coalition. China’s rapid growth unnerves many states on its perimeter, from India, east to Vietnam, Indonesia and Australia, north to Taiwan, Japan, and Russia. Were these states to align, they might contain China in the same way the Japan, China, and NATO all worked to contain the U.S.SR. The peaceful rise seemed to work, especially in southeast Asia, where Chinese generosity has successfully blocked a united ASEAN position on South China Sea issues.
Since 2009 however, China has increasingly resorted to bullying and threats. The 2008 Olympics appears to have been read in Beijing as a sign of China’s newfound might and sway. In the South China Sea it has pushed a very expansive definition of its maritime zone of control, and it recently faced down the Philippines in a dispute over the Scarborough Shoal in that sea. Indeed, one possible explanation for China’s expansion of its air defense identification zone (ADIZ) in the East China Sea is that a hard line seems to be working in the South China Sea. But China’s northeast Asian neighbors are far stronger and more capable than its southeast Asian ones. Most observers expect Japan, South Korea and the U.S. to push back, as indeed they have. The U.S. flew bombers through the new ADIZ without warning, and both Japanese and South Korean civilian airlines have been instructed by their respective governments not to comply.
All this then sets up a bipolar contest between China and Japan, in the context of China’s rapid rise toward regional dominance.
Chinese Hegemony?
A common theme in the literature on China’s rise is its apparent inevitability. Westerners particularly tend to get carried away with book-titles such as Eclipse (of the U.S. by China), When China Rules the World, or China’s New Empire. History is indeed filled with the rise to dominance of powerful states. China and Japan both sought in the past to dominate Asia. Various European states including the U.S.SR, Germany, and France did the same. But frequently these would-be hegemons collided with a counter-hegemonic coalition of states unwilling to be manipulated or conquered. Occasionally the hegemonic aspirant may win; Europe under Rome was “unipolar,” as was feudal Asia now-and-again under the strongest Chinese dynasties. But there is nothing inevitable about this. Hegemonic contenders as various as Napoleon or Imperial Japan have been defeated.
To be fair, it is not clear yet if indeed China seeks regional hegemony. But there is a growing consensus among American and Japanese analysts that this is indeed the case. By Chinese hegemony in Asia we broadly mean something akin to the United States’ position in Latin America. We do not mean actual conquest.Almost no one believes China intends to annex even its weakest neighbors like Cambodia or North Korea. Rather, analysts expect a zone of super-ordinate influence over neighbors.
For example, in 1823, U.S. president James Monroe proclaimed the Monroe Doctrine, which warned all non-American powers to stay out of the Western Hemisphere on pain of U.S. retaliation. This has worked reasonably well for almost 200 years. The U.S. has variously used force, aid, covert CIA assistance, trade, and so on to eject foreign powers from what Washington (condescendingly) came to call “America’s backyard.” Today, of course, such language seems disturbingly neocolonial, but many assume that the fundamental illiberalism of such spheres of influence do not worry non-democracies like China. A Sinic Monroe Doctrine would likely include some mix of the following:
– the withdrawal of U.S. forces from Japan and Korea,
– U.S. naval retrenchment from east Asia, perhaps as far back as Hawaii,
– a division of the Pacific into east/U.S. and west/China zones with a Chinese blue-water navy operating beyond the so-called second island chain running from Japan southeast to New Guinea,
– an RMB currency bloc in southeast Asia and possibly Korea,
– a regional trading zone,
– foreign policies from China’s neighbors broadly in sync with its own.
This is not going to happen soon of course. This is a project for the next several decades, just as U.S. power over Latin America came slowly through the nineteenth century. But such goals would broadly fit with what we have seen in the behavior of previous hegemons, including Imperial Japan and China, Rome, the British Empire, the U.S. in Latin America, and various German plans for Eastern Europe in the first half of the twentieth century. The era of U.S. preponderance in Asia is coming to an end.
Just days after confidently explaining to the CNBC audience and all his newsletter-followers that the S&P 500 could see a 15% correction:
“I just think you’re going to have a very severe, very substantive and really quite ugly correction that will probably make a lot of people wail and gnash their teeth before it’s done,”
February 3rd (Ugly Correction coming – S&P 500 at 1,742)
…the world-renowned Dennis Gartman has done it again
February 10th (I’d say I was wrong… you can’t be short – S&P 500 at 1,799.5)
“vociferously, I’d say I was wrong“
adding in his usual authoritative manner – prideless to the end:
“The one thing I will tell you is: You can’t be short. It’s still a bull market. That’s what’s really important. It’s one thing to lose money. It’s another thing not to make money. And if you’re short, you’re losing money.”
Seems like $29.99 well spent to us?…
And in that one sentence, Gartman gave the implicit all-clear to sell Mortimer sell – sell it all…
But wait, there’s more… despite thinking stocks could drop 15% and now that stocks are in a bull market, Gartman notes,
“I’m still neutral on equities…”
Brian Kelly adds at the end – desparately trying not to entirely destroy what is left of Gartman’s credibility…
“Unlike the Godfather, Dennis Gartman, I am still short. And I think you can be short this market,” he said. “I think there’s a real risk that (Federal Reserve Chair) Janet Yellen comes out a lot more hawkish than people have priced in here, and I don’t think the emerging-market currency issues are over. I think we’re just in the eye of the storm.”
Despite the yeah-meh-bleh nature of consumer confidence measures, Gallup's more broadly surveyed, and seemingly consistent with the reality of the American workforce, index of economic confidence remains lackluster at best and dismal at worst. However, there is one bright shining beacon of light across the "United" States of America… one state stands proud as the lone state that is economically confident… that state is… drum roll please… D.C.
The number of Americans that renounced their citizenship was 221 percent higher in 2013 than it was in 2012. That is a staggering figure, and it is symptomatic of a larger trend. In recent years, a lot of really good people with very deep roots in this country have made the difficult decision to say goodbye to the United States permanently. A few actually go to the trouble to renounce their citizenship, and that is mostly done for tax purposes. But most willingly choose to leave America for other reasons.
Some were very serious when they said they would leave the U.S. if Barack Obama got a second term, some (such as Jesse Ventura) are dismayed at how our freedoms and liberties are eroding and are alarmed at the rise of the Big Brother police state, some are absolutely disgusted by the social and moral decay that is eating away at the foundations of our society, and there are yet others that consider "the grass to be greener" on the other side of the planet.
Personally, I have a number of friends that have made the very hard decision to relocate their families thousands of miles away because they see what is coming to America and they believe that there isn't any hope of turning things around at this point. I also have a lot of friends that are determined to stay in the United States no matter what. When it comes to the future of America, almost everyone has a very strong opinion, and these are discussions that we need to start having.
Once upon a time, the United States was seen as "the land of opportunity" all over the globe and it seemed like everyone wanted to come here.
But now that is all changing. As we have abandoned the principles that this country was founded upon, our economy has gone steadily downhill.
As I wrote about the other day, the middle class in America is slowly dying. As millions of good paying jobs have been shipped out of the country, the competition for the remaining jobs has become quite intense. At this point, there is even tremendous competition for minimum wage jobs.
Compared to exactly six years ago, 1,154,000 fewer Americans have jobs. Meanwhile, our population has gotten significantly larger since then. There simply are not enough jobs for everyone, and we continue to fall even farther behind. In January, the economy only added 113,000 jobs and in December the economy only added 75,000 jobs. Both of those figures are well below what we need just to keep up with population growth.
Looking ahead, things look even more troubling.
The number of "planned job cuts" in January was 12 percent higher than 12 months earlier, and it was actually 47 percent higher than in December.
The competition for jobs has also resulted in an extended period of declining incomes in the United States.
As I mention frequently, median household income in the United States has fallen for five years in a row, and the rate of homeownership in the United States has fallen for eight years in a row.
Those that read my articles regularly probably have those facts memorized by now.
In addition, a study that just came out has shown that the number of "low-wage breadwinners" in the United States is at an all-time high…
A staggering number of American households are relying on low-wage jobs as their leading or sole source of income.
Meet the low-wage breadwinner. There were about 21 million of them in the United States in 2011, according to a forthcoming study by University of Massachusetts Boston economists Randy Albelda and Michael Carr.
Unlike other studies which often focus just on low-wage workers, the researchers looked at those who also live in low-income households.
This way, they were able to strip out the teenager making $8 an hour flipping burgers but still living comfortably with his parents. Or the mom who works a part-time job in retail to supplement her husband's otherwise ample salary.
For tens of millions of average American families, there simply is not enough money left at the end of each month.
That is why many of them turn to debt to try to make up the difference. Consumer credit is increasing at an alarming pace once again, and when the next great economic shock arrives many of those families are going to be in for a tremendous amount of financial pain.
In this type of economic environment, it should not be a surprise that anger, frustration and desperation are rising to very dangerous levels.
It was desperation and a fear of losing everything that he had ever worked for that drove one 80-year-old man to become a methamphetamine courier.
Rather than simply grumble to himself or complain to others, a St. Louis man aggrieved by a company's failure to hire him took another approach.
Jevons Brown packaged up cat feces and sent it through the mail.
Brown, 58, was sentenced Friday to two years of probation after pleading guilty in August to a misdemeanor charge of mailing injurious articles.
The plea says Brown, a veteran, became frustrated with his lack of employment opportunities and lashed out at employees of companies that failed to hire him.
This is just the tip of the iceberg.
In the years ahead, we are going to see much, much worse.
And if you do lose everything, don't expect anyone to care very much. There is already a frightening lack of compassion for those that are down on their luck in the United States today. For example, in Pensacola, Florida it is actually illegal for homeless people to use blankets or cardboard boxes to shield themselves from the cold…
So there I was with my wife and three kids, all of us huddled under blankets with the fireplace roaring, watching the temperature continue to drop from a comfortable 65 degrees down to 45. But outside it was 17 degrees and raining and sleeting, and if you were homeless, you had to consider that if you used a blanket to shield yourself from the elements, that you might be hauled off to jail for a violation of a local ordinance prohibiting using blankets, cardboard, or newspaper to cover yourself.
Once you lose everything, society just wants you to go away.
And this lack of compassion is going to get a whole lot worse during the very hard times that are coming.
So it is easy to understand why many Americans would want to get out of this country while they still can.
However, the truth is that the grass is not necessarily greener on the other side.
For instance, you may be dreaming of moving to a tropical paradise where you can enjoy the sand and the sun every single day.
In the past, many Americans considered Puerto Rico a good place to relocate to. After all, it is a United States territory and if you only speak English you can still get around pretty well.
But you wouldn't want to move down to Puerto Rico these days. Right now it is in the middle of a full-blown economic collapse…
Puerto Rico’s slow-motion economic crisis skidded to a new low last week when both Standard & Poor’s and Moody’s downgraded its debt to junk status, brushing aside a series of austerity measures taken by the new governor, including increasing taxes and rebalancing pensions. But that is only the latest in a sharp decline leading to widespread fears about Puerto Rico’s future. In the past eight years, Puerto Rico’s ticker tape of woes has stretched unabated: $70 billion in debt, a 15.4 percent unemployment rate, a soaring cost of living, pervasive crime, crumbling schools and a worrisome exodus of professionals and middle-class Puerto Ricans who have moved to places like Florida and Texas.
In fact, Puerto Rico is a preview of the kind of societal chaos that we could be seeing inside the United States in just a few years…
Schools sit shuttered either because of disrepair or because of a dwindling number of students. In this typically convivial capital, communities have erected gates and bars to help thwart carjackers and home invaders. Illegal drugs, including high-level narcotrafficking, are one of the few growth industries.
Well, what about South America?
In recent years, South America has been an extremely popular destination for those wishing to leave the United States.
Unfortunately, many areas of South America are experiencing full-blown economic collapse right now as well. As I wrote about recently, deteriorating economic conditions have resulted in widespread crime, looting, violence, blackouts, shortages of basic supplies, and runs on the banks in Argentina and Venezuela. The following is an excerpt from a recent interview with Fernando Aguirre who actually lives down in Argentina…
Chris Martenson: Okay. Bring us up to date. What is happening in Argentina right now with respect to its currency, the peso?
Fernando Aguirre: Well, actually pretty recently, January 22, the peso lost 15% of its value. It has devalued quite a bit. It ended up losing 20% of its value that week, and it has been pretty crazy since then. Inflation has been rampant in some sectors, going up to 100% in food, grocery stores 20%, 30% in some cases. So it has been pretty complicated. Lots of stores don't want to be selling stuff until they get updated prices. Suppliers holding on, waiting to see how things go, which is something that we are familiar with because that happened back in 2001 when everything went down as we know it did.
Chris Martenson: So 100%, 20% inflation; are those yearly numbers?
Fernando Aguirre: Those are our numbers in a matter of days. In just one day, for example, cement in Balcarce, one of the towns in Southern Argentina, went up 100% overnight, doubling in price. Grocery stores in Córdoba, even in Buenos Aires, people are talking about increase of prices of 20, 30% just these days. I actually have family in Argentina that are telling me that they go to a hardware store and they aren't even able to buy stuff from there because stores want to hold on and see how prices unfold in the following days.
Well, what about Europe?
Isn't Europe a lot more stable?
Unfortunately, that is not necessarily true. In recent years we have seen rioting, civil unrest and Depression-like conditions in Ukraine, Greece, Spain, Italy and Portugal.
More than 150 people were wounded in Bosnia on Friday in the worst civil unrest in the country since the 1992-95 war as anger over the dire state of the economy and political inertia boiled over.
Angry protesters set fire to part of the presidential palace in Sarajevo in protests over unemployment and corruption, as well as government buildings in the capital Sarajevo, Tuzla and Zenica.
Just because you move out of the United States does not necessarily mean that you will avoid what is coming.
We are heading for a global economic collapse, and the pain is going to be felt to the farthest corners of the planet.
But of course there are many that will end up leaving the United States and will ultimately thrive.
So what do you think?
Is now a time for people to consider leaving the United States permanently?
… or else the following photo just tweeted by Marie-Antoinette Michelle Obama of White House canines dining on fine taxpayer-funded china might have seemed just a little inappropriate.
The chart below is very familiar to anyone who was observing the hourly turmoil in the European bond market in November of 2011, when Italian bonds crashed, when yields soared to record levels, and every downtick of the Euro could have been its last.
What the chart may not show are the dramatic transformations in Italy’s government that took place just as the Italian bond spread exploded, which saw the resignation of career-politician Sylvio Berlusconi literally days after yields soared, and the instatement of Goldman technocrat Mario Monti as Italy’s next Prime Minister.
In fact as some, and certainly this website, had suggested the blow out in Italian yields was merely a grand plan orchestrated to usher in a new Italian government that would, with the support of yet another Goldman alum, the ECB’s then brand new head Mario Draghi, unleash a new era in Italian life, supposedly one of austerity (ignoring that two years after Berlusconi, Italy’s debt to GDP ratio has never been higher), and which would give the impression that Europe is being fixed all the while preserving the broken European monetary system for at least another year or two. In other words a grand conspiracy theory of a pre-planned bloodless coup. That all this would take place under the auspices and with the blessing of Italy’s president Napolitano, only made things worse since Italy is not a parliamentary republic but a parliamentary democracy, where such cloak and dagger arrangements are certainly not permitted under the constitution.
And so, as lately so often happens, courtesy of the narrative by Alan Friedman of what really happened that summer, this too conspiracy theory has just become conspiracy fact. Thanks to the FT’s “Monti’s secret summer“, we learn with painful detail (especially for those of our readers who may be Italian), just how the grand conspiracy to out Berlusconi took shape, and how it was deviously executed with the assistance of none other than the European Central Bank.
It all started on In the summer of 2011 when Carlo De Benedetti, the Italian industrial tycoon, hosted Mario Monti, Italy’s then former prime minister and an old friend of De Benedetti’s in the St Moritz-based alpine retreat of the industrialist for dinner, and a private chat to discuss “a development that was to have profound public consequences.” We go to the FT for the full details:
“Mario asked if we could get together, and I chose a typical little Swiss trattoria for dinner, just outside of St Moritz. But at the last minute he said he wanted to talk in private and so I said ‘Sure, stop by my house before dinner’ and so he came by,” Mr De Benedetti says. “And it was then he told me that it was possible that the president of the republic, Napolitano, would ask him to become prime minister, and he asked my advice.”
Mr De Benedetti says the two men “discussed whether he should accept the offer, and when would be the right moment to do so. This happened at my house in August, so in fact he had already spoken with President Napolitano.”
The offer from Giorgio Napolitano, the Italian president, to Mr Monti of the job of prime minister – a post that was still very much occupied by Silvio Berlusconi, the billionaire centre-right politician – is at the core of serious questions of legitimacy in Italy. What happened in Italy that summer and autumn as policy makers battled the crisis gripping the eurozone is still a subject of intense debate.
Here, the story takes a detour to a glimpse of the denouement, by advising readers that the president’s “planning the replacement of the elected Mr Berlusconi by the unelected technocrat Mr Monti – months ahead of the eventual transfer of power in November – reinforces concerns about Mr Napolitano’s repeated and forceful interventions in politics. His outsized role since the crisis has led many to question whether he stretched his constitutional powers to their limits – or even beyond.” Of course, he did – and so did all other European bankers and business tycoons who knew they had to perpetuate the legacy status quo as long as possible or else their fortunes would come crumbling down before their eyes. But we already knew that. What we did not know were the explicit details of how the immaculate plan to wrest control of Italy from the playboy billionaire and hand it over to what essentially were Goldman’s key European tentacles, were conceived. So we read on:
Outside the calm of St Moritz that summer, the eurozone crisis was raging. Market speculation against Italian and Spanish sovereign debt was rampant and the spread between Italian Treasury bonds and German Bunds was rocketing. As its borrowing costs rose there was talk that Italy could default. Italy was in crisis – politically as well as economically.
In Rome, Mr Berlusconi was presiding over a rancorous, unstable coalition and increasingly distracted by allegations over sexual relations with Karim el-Mahroug, a Moroccan nightclub dancer. All of Europe seemed to be lambasting him.
Yet despite the controversy engulfing Mr Berlusconi, he was still the sitting prime minister and his government was legitimate under the rules of Italy’s parliamentary democracy.
How long that might last was a subject of conversation between Mr De Benedetti and Mr Monti that August.
“I told Mario that he should take the job but that it was all a question of timing. If Napolitano formalised the offer in September then that was fine, but if he left it until December then it would be too late,” recounts Mr De Benedetti.
So now we know the timeframe for the upcoming coup: ideally sometime, in October or November of 2011. But before that, it was the turn of another element – this time the European connection Romano Prodi – to give his blessing and to explain to Monti why he would soon be the “happiest man alive:”
Romano Prodi, a former president of the European Commission and another old friend of Mr Monti’s, recalls a similar conversation, but even earlier, towards the end of June 2011. “We had a long and friendly conversation,” Mr Prodi says, “and he asked for my thoughts, and I told him, ‘look here Mario, there is nothing you can do to become prime minister but if the job is offered to you then you cannot say no. So you should be the happiest man alive’.”
Finally, the only missing link was the codification of the “reforms” that Italy would undergo the second Berlusconi was booted out.
Corrado Passera, a leading banker who was to become Mr Monti’s minister for economic development, infrastructure and transport, was meanwhile given the green light that summer by Mr Napolitano to prepare a confidential 196-page document containing his own proposals for a wide-ranging “shock therapy” for the Italian economy. It was a programme of proposed government policies and reforms that went through four successive drafts as Mr Napolitano and Mr Passera discussed it back and forth that summer and into the autumn.
With all that in place, it was time to put the plan into effect.
Italy’s crisis intensified throughout the autumn of 2011. All Italians still remember the smirk of scepticism on the faces of Angela Merkel, the German chancellor, and Nicolas Sarkozy, the French president, when they were asked at a press conference in October if they had confidence in Mr Berlusconi’s ability to cut the deficit or reduce the debt, which was then at 120 per cent of gross domestic product. (The latest figure is 133 per cent.)
So yes, for anyone still confused – since total debt/GDP has risen by 13% in the past two years, the last thing Italy engaged in was austerity designed to moderate its out of control public spending. What it did engage in, was epic capital misallocation, even greater corruption, and gross incompetence. All of these, however, were conveniently scapegoated on the only well-known traditional fallback.
At this point, we should remind readers of a concurrent story, one involving Italy’s then-member of the ECB executive council, Lorenzo Bini-Smaghi, who revealed in a recent book that at just around this time Berlusconi was realizing that the trap was closing. Bini-Smaghi revealed that Berlusconi had “discussed (threatened?) Italian withdrawal from the euro in private meetings with other EMU governments, presumably with Chancellor Angela Merkel and France’s Nicolas Sarkozy, since he does not negotiate with underlings.”
And so the ECB went to task, and under its new boss, yet another Italian, former Goldmanite Mario Draghi, allowed Italian bond yields to crater and take the country, and the Eurozone, and thus the entire developed world, to the edge of collapse. Just so Italy’s president had a pretext to accelerate the demise of Berlusconi and catalyze his replacement with a technocrat crony of the financial establishment. Once again, as a reminder, here is the dynamic of bond yields soaring just as Berlusconi was threatening to end the European dream in which “so much political capital is invested”:
What happened after that moment is part of the public record:
On November 9 2011 Mr Napolitano appointed Mr Monti a senator for life, thus making him a member of parliament. On November 12, at a meeting with the president, Mr Berlusconi resigned, ending his third stint as prime minister. Within 24 hours – rather than call for fresh elections – Mr Napolitano named Mr Monti, the economics professor and former European commissioner who had never held elected office, as prime minister. The full cabinet was sworn in three days later.
Mr Berlusconi’s supporters cried foul and made noisy claims that there had been a “coup”.
They were right, and now – from the horse’s mouth – we know the facts.
In a lengthy videotaped interview with Mr Monti, he confirmed the conversation with Mr De Benedetti in St Moritz. He also acknowledged the conversation with Mr Prodi in June 2011, though at first he played down these talks, saying that the idea of him becoming prime minister “was sort of in the air”.
He recalled with a giggle that “Yes, Prodi came to see me at the end of June and the spread [between Italian and German government bond yields] was then about 220 or 250 basis points, and he told me: ‘Get ready, because when the spread hits 300 you will be called in’. And then the spread hit 550!”
… as if by magic. Supposedly Draghi wasn’t quite willing to do “whatever it takes” just yet.
Mr Monti confirmed that he knew all about the Passera document being prepared for the president. “Corrado Passera told me he was working on this and he said he would show it to me, and he did, and he told me he had given it to Napolitano and would give it to me,” Mr Monti said. “And on one occasion I discussed the Passera document with Napolitano, and then later on, months later, when I was named prime minister, I immediately asked Passera to join the Cabinet.”
But when asked if it was made clear to him in the summer of 2011 in his talks with Mr Napolitano that the president was asking him to be ready to take over from Mr Berlusconi, Mr Monti hesitated. “Well, President Napolitano and I had been talking for a long time, for years, not about this, but then things sort of came to a head.”
When pressed further to explain if Mr Napolitano had explicitly asked him to be on standby during their talks back in June and July 2011 – four to five months before he replaced Mr Berlusconi as prime minister – Mr Monti demurred: “Look here: I will not reveal details of conversations that I had with the president of the republic.”
Pressed again, and asked if he wished to deny on the record that in June and July of 2011 President Napolitano had either asked him explicitly or had made it clear that he wanted him to be available to become the new prime minister, Mr Monti replied falteringly, in a voice that became almost a whisper: “Yes. He, uh, he gave me a signal in that direction.” After this revelation a look of extreme discomfort spread across Mr Monti’s face and he stared off to one side.
Perhaps because Monti had just realized he admitted that Italy had undergone presidentially-blessed government coup – one whose execution stretched far beyond any constitutional powers awarded to the president, and one which involved numerous foreign (and financial) interests (and conflicts thereof).
At this point attention turns to Italy’s president, 89-year old Giorgio Napolitan0, whose direct intervention was instrumental in allowing this carefully laid “bloodless coup” plan of bankers and technocrats to proceed:
Mr Napolitano did not agree to an interview despite repeated requests. His spokesman had no comment on a series of written questions, including one about which month in 2011 Mr Napolitano had first sounded out Mr Monti to become prime minister.
But last week Mr Napolitano commented for the first time on the controversy over his naming of Mr Monti. During a visit to the European parliament in Strasbourg, Mr Napolitano said that while some had described his naming of Mr Monti “as almost invented by me as a personal whim”, in fact he had done so on the basis of indications given to him by parliamentary and political leaders “in the course of consultations as is required”.
This explanation could raise further questions in Italy, where such “consultations as is required” would typically have begun only upon the resignation of the prime minister. In Mr Berlusconi’s case, these would have begun upon his November 12 resignation.
We now know that all such consultations took place well before said resignation. But where it gets better is just how grand the chess game truly was:
The Monti government acted swiftly to introduce harsh austerity measures, spending cuts, a value added tax rise and new property duties as well as reform of the pensions system. Praise was duly heaped on him by the European Commission, the International Monetary Fund and financial markets.
Many Italians still despise Mr Monti for the austerity programme and see him as a pawn of the European Commission or of Ms Merkel. In retrospect he lacked a political touch but was a useful transition figure at a time of crisis.
Mr Monti says his greatest achievement was to jump into electoral politics during the election of February 2013 at the expense of Berlusconi’s party. “Had it not been for my taking votes away from the centre-right,” Mr Monti said in the interview, “Berlusconi today would be either the president of the republic or the prime minister, so I did achieve a concrete result in blocking that.”
Of course, Berlusconi’s star has now faded, and with it the danger that the supposedly irrational politician, who once had threatened to dissolve the Eurozone and thus saddle Germany with a TARGET2 bill amounting to almost $1 trillion. Which meant that the status quo of the “equity tranche” (read – the global banker aristocracy) had been preserved. In this way, Napolitano, Prodi and Monti, assisted by their fourth Italian friend – ECB’s Mario Draghi – effectively subjugated the Italian population to call it austerity, call it gross and premeditated capital misallocation, but certainly call it the will of the bankers. And all without firing a shot.
Which brings up the question of just how constitutional, if at all, was the overthrow of Berlusconi.
Adopted in 1948 after more than 20 years of chaos and brutal fascist rule, Italy’s constitution is one of the few documents universally respected by Italians. It guarantees their most basic rights. It is sacrosanct.
Planning in secret, even as a contingency measure, to appoint a new prime minister when a parliamentary majority is in place may be a prudent and responsible action for a president but it is not an explicit power assigned by the constitution, even if there is a financial crisis under way in half of Europe as was the case in the summer of 2011.
Most ironic, however, is that the only person who seems to care about the trampling of the opposition is the former comedian.
Whatever one thinks of Mr Berlusconi, serious constitutional questions are raised by the behind-the-scenes manoeuvring that resulted in the appointment of his successor. Perhaps the loudest voice to raise these questions is that of Beppe Grillo, the comedian-turned-politician who garnered 25 per cent of the national vote last year.
Mr Napolitano, an 89-year-old former communist, has reacted with anger at Mr Grillo’s incessant accusations of the subversion of democracy. Mr Grillo has frequently called for Mr Napolitano’s impeachment.
Today, Italy is emerging from recession slowly, with an exceedingly weak and uneven economic recovery. This year is expected to bring less than 1 per cent growth in GDP.
Italy remains sharply divided over the events of 2011 and Mr Napolitano’s role in them. The issue of whether Mr Napolitano went beyond his constitutional powers during the summer and autumn of 2011 can be left to future historians. But what is clear now – thanks to Mr Monti’s own admission – is that he and the president had been discussing the prospect of his taking over from Mr Berlusconi long before his official appointment in November of 2011. For Mario Monti it had been a long and secret summer.
Indeed it had. And now we know that in order to effectuate the banker plan of preserving Europe’s “political capital” which is simply another name of trillions in wealth on paper (and on funny-colored pieces of European currency) that would evaporate if and when the Eurozone inevitably dissolves, it took just four Italians – Monti, Prodi, Napolitano and, of course, Draghi – willing to trample their constitution in order to achieve the goal of perpetuating the status quo no matter the cost.
As for the fallout, namely “youth unemployment is at a record high of 41.6 per cent, nationwide joblessness is 12.7 per cent and almost a third of families are near the poverty line. Productivity and competitiveness have dropped sharply in recent years. Mr Monti’s successor, Enrico Letta, another leader championed by Mr Napolitano, is under fire for his handling of the economy”… well, all those are problems of the “99%”. And as everyone knows by know, the 99% is the last thing on the mind of the global ruling class.
The chart below is very familiar to anyone who was observing the hourly turmoil in the European bond market in November of 2011, when Italian bonds crashed, when yields soared to record levels, and every downtick of the Euro could have been its last.
What the chart may not show are the dramatic transformations in Italy’s government that took place just as the Italian bond spread exploded, which saw the resignation of career-politician Sylvio Berlusconi literally days after yields soared, and the instatement of Goldman technocrat Mario Monti as Italy’s next Prime Minister.
In fact as some, and certainly this website, had suggested the blow out in Italian yields was merely a grand plan orchestrated to usher in a new Italian government that would, with the support of yet another Goldman alum, the ECB’s then brand new head Mario Draghi, unleash a new era in Italian life, supposedly one of austerity (ignoring that two years after Berlusconi, Italy’s debt to GDP ratio has never been higher), and which would give the impression that Europe is being fixed all the while preserving the broken European monetary system for at least another year or two. In other words a grand conspiracy theory of a pre-planned bloodless coup. That all this would take place under the auspices and with the blessing of Italy’s president Napolitano, only made things worse since Italy is not a parliamentary republic but a parliamentary democracy, where such cloak and dagger arrangements are certainly not permitted under the constitution.
And so, as lately so often happens, courtesy of the narrative by Alan Friedman of what really happened that summer, this too conspiracy theory has just become conspiracy fact. Thanks to the FT’s “Monti’s secret summer“, we learn with painful detail (especially for those of our readers who may be Italian), just how the grand conspiracy to out Berlusconi took shape, and how it was deviously executed with the assistance of none other than the European Central Bank.
It all started on In the summer of 2011 when Carlo De Benedetti, the Italian industrial tycoon, hosted Mario Monti, Italy’s then former prime minister and an old friend of De Benedetti’s in the St Moritz-based alpine retreat of the industrialist for dinner, and a private chat to discuss “a development that was to have profound public consequences.” We go to the FT for the full details:
“Mario asked if we could get together, and I chose a typical little Swiss trattoria for dinner, just outside of St Moritz. But at the last minute he said he wanted to talk in private and so I said ‘Sure, stop by my house before dinner’ and so he came by,” Mr De Benedetti says. “And it was then he told me that it was possible that the president of the republic, Napolitano, would ask him to become prime minister, and he asked my advice.”
Mr De Benedetti says the two men “discussed whether he should accept the offer, and when would be the right moment to do so. This happened at my house in August, so in fact he had already spoken with President Napolitano.”
The offer from Giorgio Napolitano, the Italian president, to Mr Monti of the job of prime minister – a post that was still very much occupied by Silvio Berlusconi, the billionaire centre-right politician – is at the core of serious questions of legitimacy in Italy. What happened in Italy that summer and autumn as policy makers battled the crisis gripping the eurozone is still a subject of intense debate.
Here, the story takes a detour to a glimpse of the denouement, by advising readers that the president’s “planning the replacement of the elected Mr Berlusconi by the unelected technocrat Mr Monti – months ahead of the eventual transfer of power in November – reinforces concerns about Mr Napolitano’s repeated and forceful interventions in politics. His outsized role since the crisis has led many to question whether he stretched his constitutional powers to their limits – or even beyond.” Of course, he did – and so did all other European bankers and business tycoons who knew they had to perpetuate the legacy status quo as long as possible or else their fortunes would come crumbling down before their eyes. But we already knew that. What we did not know were the explicit details of how the immaculate plan to wrest control of Italy from the playboy billionaire and hand it over to what essentially were Goldman’s key European tentacles, were conceived. So we read on:
Outside the calm of St Moritz that summer, the eurozone crisis was raging. Market speculation against Italian and Spanish sovereign debt was rampant and the spread between Italian Treasury bonds and German Bunds was rocketing. As its borrowing costs rose there was talk that Italy could default. Italy was in crisis – politically as well as economically.
In Rome, Mr Berlusconi was presiding over a rancorous, unstable coalition and increasingly distracted by allegations over sexual relations with Karim el-Mahroug, a Moroccan nightclub dancer. All of Europe seemed to be lambasting him.
Yet despite the controversy engulfing Mr Berlusconi, he was still the sitting prime minister and his government was legitimate under the rules of Italy’s parliamentary democracy.
How long that might last was a subject of conversation between Mr De Benedetti and Mr Monti that August.
“I told Mario that he should take the job but that it was all a question of timing. If Napolitano formalised the offer in September then that was fine, but if he left it until December then it would be too late,” recounts Mr De Benedetti.
So now we know the timeframe for the upcoming coup: ideally sometime, in October or November of 2011. But before that, it was the turn of another element – this time the European connection Romano Prodi – to give his blessing and to explain to Monti why he would soon be the “happiest man alive:”
Romano Prodi, a former president of the European Commission and another old friend of Mr Monti’s, recalls a similar conversation, but even earlier, towards the end of June 2011. “We had a long and friendly conversation,” Mr Prodi says, “and he asked for my thoughts, and I told him, ‘look here Mario, there is nothing you can do to become prime minister but if the job is offered to you then you cannot say no. So you should be the happiest man alive’.”
Finally, the only missing link was the codification of the “reforms” that Italy would undergo the second Berlusconi was booted out.
Corrado Passera, a leading banker who was to become Mr Monti’s minister for economic development, infrastructure and transport, was meanwhile given the green light that summer by Mr Napolitano to prepare a confidential 196-page document containing his own proposals for a wide-ranging “shock therapy” for the Italian economy. It was a programme of proposed government policies and reforms that went through four successive drafts as Mr Napolitano and Mr Passera discussed it back and forth that summer and into the autumn.
With all that in place, it was time to put the plan into effect.
Italy’s crisis intensified throughout the autumn
of 2011. All Italians still remember the smirk of scepticism on the faces of Angela Merkel, the German chancellor, and Nicolas Sarkozy, the French president, when they were asked at a press conference in October if they had confidence in Mr Berlusconi’s ability to cut the deficit or reduce the debt, which was then at 120 per cent of gross domestic product. (The latest figure is 133 per cent.)
So yes, for anyone still confused – since total debt/GDP has risen by 13% in the past two years, the last thing Italy engaged in was austerity designed to moderate its out of control public spending. What it did engage in, was epic capital misallocation, even greater corruption, and gross incompetence. All of these, however, were conveniently scapegoated on the only well-known traditional fallback.
At this point, we should remind readers of a concurrent story, one involving Italy’s then-member of the ECB executive council, Lorenzo Bini-Smaghi, who revealed in a recent book that at just around this time Berlusconi was realizing that the trap was closing. Bini-Smaghi revealed that Berlusconi had “discussed (threatened?) Italian withdrawal from the euro in private meetings with other EMU governments, presumably with Chancellor Angela Merkel and France’s Nicolas Sarkozy, since he does not negotiate with underlings.”
And so the ECB went to task, and under its new boss, yet another Italian, former Goldmanite Mario Draghi, allowed Italian bond yields to crater and take the country, and the Eurozone, and thus the entire developed world, to the edge of collapse. Just so Italy’s president had a pretext to accelerate the demise of Berlusconi and catalyze his replacement with a technocrat crony of the financial establishment. Once again, as a reminder, here is the dynamic of bond yields soaring just as Berlusconi was threatening to end the European dream in which “so much political capital is invested”:
What happened after that moment is part of the public record:
On November 9 2011 Mr Napolitano appointed Mr Monti a senator for life, thus making him a member of parliament. On November 12, at a meeting with the president, Mr Berlusconi resigned, ending his third stint as prime minister. Within 24 hours – rather than call for fresh elections – Mr Napolitano named Mr Monti, the economics professor and former European commissioner who had never held elected office, as prime minister. The full cabinet was sworn in three days later.
Mr Berlusconi’s supporters cried foul and made noisy claims that there had been a “coup”.
They were right, and now – from the horse’s mouth – we know the facts.
In a lengthy videotaped interview with Mr Monti, he confirmed the conversation with Mr De Benedetti in St Moritz. He also acknowledged the conversation with Mr Prodi in June 2011, though at first he played down these talks, saying that the idea of him becoming prime minister “was sort of in the air”.
He recalled with a giggle that “Yes, Prodi came to see me at the end of June and the spread [between Italian and German government bond yields] was then about 220 or 250 basis points, and he told me: ‘Get ready, because when the spread hits 300 you will be called in’. And then the spread hit 550!”
… as if by magic. Supposedly Draghi wasn’t quite willing to do “whatever it takes” just yet.
Mr Monti confirmed that he knew all about the Passera document being prepared for the president. “Corrado Passera told me he was working on this and he said he would show it to me, and he did, and he told me he had given it to Napolitano and would give it to me,” Mr Monti said. “And on one occasion I discussed the Passera document with Napolitano, and then later on, months later, when I was named prime minister, I immediately asked Passera to join the Cabinet.”
But when asked if it was made clear to him in the summer of 2011 in his talks with Mr Napolitano that the president was asking him to be ready to take over from Mr Berlusconi, Mr Monti hesitated. “Well, President Napolitano and I had been talking for a long time, for years, not about this, but then things sort of came to a head.”
When pressed further to explain if Mr Napolitano had explicitly asked him to be on standby during their talks back in June and July 2011 – four to five months before he replaced Mr Berlusconi as prime minister – Mr Monti demurred: “Look here: I will not reveal details of conversations that I had with the president of the republic.”
Pressed again, and asked if he wished to deny on the record that in June and July of 2011 President Napolitano had either asked him explicitly or had made it clear that he wanted him to be available to become the new prime minister, Mr Monti replied falteringly, in a voice that became almost a whisper: “Yes. He, uh, he gave me a signal in that direction.” After this revelation a look of extreme discomfort spread across Mr Monti’s face and he stared off to one side.
Perhaps because Monti had just realized he admitted that Italy had undergone presidentially-blessed government coup – one whose execution stretched far beyond any constitutional powers awarded to the president, and one which involved numerous foreign (and financial) interests (and conflicts thereof).
At this point attention turns to Italy’s president, 89-year old Giorgio Napolitan0, whose direct intervention was instrumental in allowing this carefully laid “bloodless coup” plan of bankers and technocrats to proceed:
Mr Napolitano did not agree to an interview despite repeated requests. His spokesman had no comment on a series of written questions, including one about which month in 2011 Mr Napolitano had first sounded out Mr Monti to become prime minister.
But last week Mr Napolitano commented for the first time on the controversy over his naming of Mr Monti. During a visit to the European parliament in Strasbourg, Mr Napolitano said that while some had described his naming of Mr Monti “as almost invented by me as a personal whim”, in fact he had done so on the basis of indications given to him by parliamentary and political leaders “in the course of consultations as is required”.
This explanation could raise further quest
ions in Italy, where such “consultations as is required” would typically have begun only upon the resignation of the prime minister. In Mr Berlusconi’s case, these would have begun upon his November 12 resignation.
We now know that all such consultations took place well before said resignation. But where it gets better is just how grand the chess game truly was:
The Monti government acted swiftly to introduce harsh austerity measures, spending cuts, a value added tax rise and new property duties as well as reform of the pensions system. Praise was duly heaped on him by the European Commission, the International Monetary Fund and financial markets.
Many Italians still despise Mr Monti for the austerity programme and see him as a pawn of the European Commission or of Ms Merkel. In retrospect he lacked a political touch but was a useful transition figure at a time of crisis.
Mr Monti says his greatest achievement was to jump into electoral politics during the election of February 2013 at the expense of Berlusconi’s party. “Had it not been for my taking votes away from the centre-right,” Mr Monti said in the interview, “Berlusconi today would be either the president of the republic or the prime minister, so I did achieve a concrete result in blocking that.”
Of course, Berlusconi’s star has now faded, and with it the danger that the supposedly irrational politician, who once had threatened to dissolve the Eurozone and thus saddle Germany with a TARGET2 bill amounting to almost $1 trillion. Which meant that the status quo of the “equity tranche” (read – the global banker aristocracy) had been preserved. In this way, Napolitano, Prodi and Monti, assisted by their fourth Italian friend – ECB’s Mario Draghi – effectively subjugated the Italian population to call it austerity, call it gross and premeditated capital misallocation, but certainly call it the will of the bankers. And all without firing a shot.
Which brings up the question of just how constitutional, if at all, was the overthrow of Berlusconi.
Adopted in 1948 after more than 20 years of chaos and brutal fascist rule, Italy’s constitution is one of the few documents universally respected by Italians. It guarantees their most basic rights. It is sacrosanct.
Planning in secret, even as a contingency measure, to appoint a new prime minister when a parliamentary majority is in place may be a prudent and responsible action for a president but it is not an explicit power assigned by the constitution, even if there is a financial crisis under way in half of Europe as was the case in the summer of 2011.
Most ironic, however, is that the only person who seems to care about the trampling of the opposition is the former comedian.
Whatever one thinks of Mr Berlusconi, serious constitutional questions are raised by the behind-the-scenes manoeuvring that resulted in the appointment of his successor. Perhaps the loudest voice to raise these questions is that of Beppe Grillo, the comedian-turned-politician who garnered 25 per cent of the national vote last year.
Mr Napolitano, an 89-year-old former communist, has reacted with anger at Mr Grillo’s incessant accusations of the subversion of democracy. Mr Grillo has frequently called for Mr Napolitano’s impeachment.
Today, Italy is emerging from recession slowly, with an exceedingly weak and uneven economic recovery. This year is expected to bring less than 1 per cent growth in GDP.
Italy remains sharply divided over the events of 2011 and Mr Napolitano’s role in them. The issue of whether Mr Napolitano went beyond his constitutional powers during the summer and autumn of 2011 can be left to future historians. But what is clear now – thanks to Mr Monti’s own admission – is that he and the president had been discussing the prospect of his taking over from Mr Berlusconi long before his official appointment in November of 2011. For Mario Monti it had been a long and secret summer.
Indeed it had. And now we know that in order to effectuate the banker plan of preserving Europe’s “political capital” which is simply another name of trillions in wealth on paper (and on funny-colored pieces of European currency) that would evaporate if and when the Eurozone inevitably dissolves, it took just four Italians – Monti, Prodi, Napolitano and, of course, Draghi – willing to trample their constitution in order to achieve the goal of perpetuating the status quo no matter the cost.
As for the fallout, namely “youth unemployment is at a record high of 41.6 per cent, nationwide joblessness is 12.7 per cent and almost a third of families are near the poverty line. Productivity and competitiveness have dropped sharply in recent years. Mr Monti’s successor, Enrico Letta, another leader championed by Mr Napolitano, is under fire for his handling of the economy”… well, all those are problems of the “99%”. And as everyone knows by know, the 99% is the last thing on the mind of the global ruling class.
Gold has risen 6 of the last 7 days, breaking back over $1,275 and closing at three-month highs as the last 3 days have seen stocks and precious metals bid. Silver is on a 7-day win streak holding above $20 for the last 3 days. Despite fading back from highs today, gold outperformed stocks and bonds (on a flat USD day) and gold remains the best-performing asset (+3.75%) from the December Taper.