Lars, a reader from Norway cited a video discussion that mentioned the Italian government has €50 billion in unpaid bills.
The video, by economist Jacques Sapir is in French. He discusses Italy’s proposed parallel currency, the Mini-BOT.
L’Italie vers une sortie de l’euro avec Jacques Sapir – Politique-Eco – YouTube
It’s an hour long and I don’t speak French so I asked Lars for a translation of key snips.
Key Points
- Around 4 minutes; Italy has had problems since intro of euro. Italy technically in recession.
- 5:40 Youth unemployment around 50%
- 8:30 The Italian government does not pay suppliers. Owe around €50 billion. 3% of GDP.
- 9:40 Sapir explains that mini BOT (Bonds Ordinaire de Tresor) will be used to pay creditors that are owed the 50 billion. Mini BOTs can also be used to pay salaries. So it becomes some kind of lira. So BOTs will circulate as if it was a parallel money (lira).
- 19:50 ECB will not accept this backdoor lira. ECB will not continue to finance Italian banks.
This is just a proposal, or a discussion of a proposal, but the idea is gaining traction. There will be a showdown soon.
For background information and further discussion, please see Meet the Mini-BOT: Italy Will Break Up the Eurozone.
Mike “Mish” Shedlock
Government debt circulating in the market, in any form, is de facto money.
If it circulates parallel to harder currency in the same economy, it is bad money.
And according to Gresham’s the good money disappears from circulation and the bad devalues and hyper-inflates and lays waste to the whole economy.
Never lend money to an Italian Prince.
I hope that the Italian people realise that restoring their own currency is just one of the things that they need to do in order to be able to make their economy stronger. Sure, it is a necessary step, but it isnt the only step by a long chalk.
Can Mini-bots be exchanged for euro? If so, as as soon as someone is paid in mini-bot, they’ll try to exchange it. And whoever is converting won’t pay much because they fear they’ll be left holding the bag. It will quickly become as valuable as Zimbabwe currency.
Exactly. Unless it has backing, it has no value. If it can be used to pay taxes at face value, that is some backing, and will give it value, however that creates additional, future problems.
Italian CB holds a lot of gold. ECB will say it’s a shared resource but as soon as Italian Gov says mini-bot is backed by Italian gold holdings by some conversion rate mini-bot become more legit.
All just imho.
Germany, France probably not under collar.