Same old same old is what we have today in the market. It seems we have reached stasis of a sort, just as we have in the following piece of news.
New data released last month signaled a milestone for American energy: natural gas joined coal as the top source of electric power.
My friends, this news carries more import for the US then the limited space the breathless media gave it today implies. Aside from the environmental implications, the news points to a potential source of market opportunity. As the natural-gas industry makes money providing power, part of the profit will go to other sources of revenue, such as NG powered cars, which means building infrastructure. Think T. Boone Pickens …
What are your thoughts regarding the economy of Italy as a whole, being led by the Mr. Mario Monti, the appointed technocrat prime minister?
The question above energized my thinking about the problems in Europe, as Italy is such a huge part of the economy there. So, as my mind works, I wanted to know more about Italy, as it relates to its fundamental economic issues …
Italy’s debt, 120% of GDP is second only to Greece’s debt in the Eurozone.Unlike Greece, though, the Italians own a good chunk of the debt, however, its foreign debt is 800 billion euros, which is more than that of Greece, Ireland and Portugal combined. Italy’s debt problem is not small, and it will not go away any time soon, especially since its economy is in recession.
Mr. Monti has introduced “more economic measures than Italy had seen in a decade” to curb the deficit spending, cut costs, and otherwise get the economy in order, but the one thing he has not been able to get done is a stimulus package that includes overhauling “Italy’s notoriously inflexible labor rules.” However, the economic measures he has put forth have “shrunk the current budget deficit to 2.8 percent of G.D.P., which is down from 4.2 percent a year earlier and below the 3 percent level required by the euro union’s membership rules.” This means the harsh overlords of from the north will not impose any other sever austerity measures on Italy, which means he can now push for the stimulus the country so desperately needs. Moreover, with the current “mood” of the Eurozone changing more toward the Hollande, French model, stimulus is on the way.
Keep in mind, Italy has Europe’s second-largest largest manufacturing and industrial base just behind Germany. Italy is “one of the biggest export-oriented economies in the euro zone.”
Yet, despite its economic prowess, the country is culturally fractured (think US politics) and it has a history of weak governing. Since World War II, more than “60 governments” have come to power, only to see minimal success actually implementing structural changes that improve the functionality of its government. In other words, it works hard at achieving important change, but it can. It actually ran a budget surplus in the early and mid 1990s.
Yet, that might change. The “Grow Italy” bill introduced in January might well pass, and that would mean a breaking of the stranglehold the medieval throwback “guilds” have on the economy, which would introduce more competition among those in middle-class professions, such as lawyers, pharmacists, taxi drivers, and other service businesses. Currently, the older, less educated population dominates the jobs, while, the younger more educated population can barely find work. This is a huge problem for Italy’s economic future.
Given all of this, my view is that Italy will right its economic ship of state. Italy has one of the highest standards of living in the world. A large percentage of its voting population is well educated, thus it will force a change in its backward view of government making it cushy for those who have jobs (young vs. old). It will stimulate its rather large economy, which will help reduce its debt even more, and with the re-emergence of the global economy, it will see tourists return to its fabled land.
By the way, Europe is the number one travel destination for Americans, and in the first two quarters of 2012, the percentage of Americans traveling to Europe has increased from some 500,000 per month to over 800,000 per month. This fact speaks to Italy, as it is one of the two top European destinations for Americans, and it says, once again, the US consumer is far from dead.
Trade in the day; Invest in your life …
