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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.

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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