ITALY RISK AND WORLD-WIDE RISK

«The Italy risk isn't different from the one of all the world-wide economy»

After the "cracks" of the Italian groups Cirio and Parmalat, several economic observers have been speaking of «Italy risk». As far as we are concerned, Italian economy and finance do not represent greater risks than the world-wide ones. Turning economy in to finance has caused a colossal transfer of resources, from real economy to speculative finance. This is why the enterprises that operate in real economy (production, commerce, services) don't have sufficient resources to complete the necessary investments.

The use of speculative finance has increased the concentration of wealth. Therefore the consumptions and, consequently, the production of real wealth are diminished. There are lots of industrial and commercial enterprises with substantial management losses all over the world, due to revenues that don't succeed to cover the production costs and the financial expenses. The only reaction of the international banking and financial system has been what now has become the praxis: to drag the enterprises in deficit in to the speculative bubble by making them think they can cover real losses with virtual yields. What they are actually doing is to use their assets (production means) in order to complete more financial operations.

Banks, auditing companies, public institutions tolerate, sometimes they even increase, the propensity towards virtual finance. They do it for monetary reasons and also in order to keep financial operations active and increase their volume so they obtain liquid resources, which are necessary to pay dividends and interests that otherwise wouldn't exist.

We've got to the point in which the banks make their participated companies emit long term bonds, which they will never be able to pay back, just to receive the commissions for their placement that they then use to cover losses. This is what the greatest bank groups of Europe, Asia and United States have done in 2003.

Enron, the Argentine bonds, Cirio and Parmalat are nothing else than the tops of many icebergs that are coming to surface and that will show their seriousness within a year and a half time, causing that monetary and financial catastrophe that the free economists of all the world have been previewing for a long time.

The crisis of the dollar regarding euro and the consequent crisis of the euro, since two thirds of it is guaranteed by dollars, will make all currencies loose great part of their purchasing power.

In the last years, production's real value, measured with the prices of 1985, is enormously diminished. We've reached the paradox that the Gross Domestic Product is determined by the monetary circulation and mass. It's a deceit, made in order to maintain the status quo of the monetary and financial system and to reassure the public about public debts. There is not one State that is in a position to reduce the public debt. In order to pay capitals and interests new debts are contracted, higher than the settled ones.

This is the truth that people must know. Historically, we know that the ignorance of the masses concurs with power to maintain its hegemony until everything collapses. When it will happen, we will assist, as every other time, to the «revenge of ignorance». When the masses, kept for years in the dark about the real situation, find themselves suffering the effects of a financial downfall that involves their material existence and the minimal survival conditions, they react with anger, emotion and violence. From the ashes of such violence, what rises is always a system almost identical to the previous one. It is happened in politics, economy, and customs, to all the systems that have gone trough a crisis.

The failure of the enterprises of the real economy will be the first signal of the future financial downfall. Subsequently there will be the financial downfall of the banks and of the great international financial institutions, Which won't be able any more «to keep the circus going» that circus that allows them to face the engagements made with the investors. This double financial downfall will cause the one of the monetary system. Currencies, today considered investment means just because they produce financial yield, will not be able to resist to the enormous difference between their real value (what they really represent) and their nominal one.

And it will be chaos. The purchasing power of currencies will lose up to the 95 per cent. Precious metals and gold's price first will reach unimaginable levels, then they will go down hasty, because gold, platinum and diamonds are not energy, neither water, food, health or production means.

It isn't catastrophism but a logical forecast of the truth that's attending us and that we can only modify if we realize that we just can't continue in this direction. And if we take conscience that the artificial system that we have invented and of which we are proud has become too unsustainable for the natural system, human system included. We must enquire, study, think, understand and act. Freely. Before the lotus flower, which doubles every year covers the entire lake and without forgetting that, at the beginning of the last year, half the lake is still visible.

January 2004.

The President
Rodolfo Marusi Guareschi