The Conte government floats thanks to Christine Lagarde’s mega bazooka, but time is running out
Between the ever increasing number of orange / red regions and an increasingly probable lockdown , the Conte government with contemptuous tranquility boasts of the spread that continues to decrease, boasting of having brought Italy (unlike the times of populism) back in line with European project and thus having restored confidence in the markets. But is it really so?
The government is right about one thing: the spread continues to decrease, it has reached 124 basis points and is expected to break through the 100-point barrier and fall further. But it is precisely this fact that makes the paradox even more evident: Italy at this moment is protected from any type of financial speculation, but the gap between the financial economy and the real economy has never been so wide. In fact, according to the simple data of the real economy, that is of Italian companies and families, the state should be close to bankruptcy. Unemployment rising, youth unemployment that risks reaching the levels of Greece in 2014, VAT numbers left more and more alone and imperceptible fiscal stimuli. Nor is there a glimmer of hope of seeing the much vaunted subsidies arrive (called "alms" in all European financial trading floors ), which however continue to increase current public spending (different from public spending which aims to increase investments, not perceived by the financial markets as "bad debt").
So, on the basis of these facts, is it really the government's credit for the seemingly calm situation of Italian debt and Italian banks? Absolutely not. As mentioned, there are huge differences at this moment between the financial world and the real economy: banks have been sheltered by Christine Lagarde's mega bazooka – which will end immediately at the end of the pandemic – and by the European Commission, which for the moment has suspended all the strict budget rules – which in any case will return into force with all their force from 2022 or even earlier, depending on the progress of the pandemic, and that the countries of the North are looking forward to restoring.
To make the paradox even more evident, a graph from the FRED ( Federal Reserve Bank of St. Louis , one of the largest databases in the world), which simply shows how the credit granted by banks to the real economy (small and medium-sized enterprises and families) has collapsed in recent times.
So, despite all the money central banks are injecting to tackle the crisis, banks are not lending to the real economy. What does this mean? That monetary policies, if not accompanied by serious and courageous fiscal policies, will never give the credibility on the markets that this government claims so much to have. With the money coming from Europe, you have the opportunity to implement a major infrastructure plan, reforms in the field of industrial relations, in the field of competition, in the banking field, in the tax system, in short, to have that far-sightedness that Roosevelt had with the New Deal when he saved the United States from a certain broken bank.
But here we know, we don't have Roosevelt, we have the People's Advocate, and as soon as the monetary drug is over, we will quickly and easily reach death from overdose, with many regards to national sovereignty …
The post The Conte Government floats thanks to Christine Lagarde's mega bazooka, but time is running out appeared first on Atlantico Quotidiano .
This is a machine translation from Italian language of a post published on Atlantico Quotidiano at the URL http://www.atlanticoquotidiano.it/quotidiano/il-governo-conte-galleggia-grazie-al-mega-bazooka-di-christine-lagarde-ma-il-tempo-sta-per-scadere/ on Thu, 12 Nov 2020 03:45:00 +0000.