Italy must choose between the euro and its own economic survival

Each year Rome hopefully pencils in a fall in the ratio of public debt to GDP, and each year the ratio rises. The reason is always the same. Deflationary conditions prevent nominal GDP rising fast enough to outgrow the debt.

 

It came close to levelling out last year at 132.7pc, helped by the tailwinds of a cheap euro, cheap oil, and Mario Draghi's fairy dust of quantitative easing. This triple stimulus is already fading before the country escapes the stagnation trap. The International Monetary Fund expects growth of just 1pc this year. 

The global window is closing in any case.  US wage growth will probably force the Federal Reserve to raise interest rates and wild speculation will certainly force China to rein in its latest credit boom.  Italy will enter the next downturn - perhaps early next year - with every macro-economic indicator in worse shape than in 2008, and half the country already near political revolt.

 The rebel Five Star movement of comedian Beppe Grillo has not faded away, and Mr Grillo is still calling for debt default and a restoration of the Italian lira to break out of the German mercantilist grip (as he sees it). His party leads the national polls at 28pc, and looks poised to take Rome in municipal elections next month.

DYI Comments:  The gold to silver ratio provides information two ways: one as we are today at 74 to 1 silver is the bargain as the price of gold has been "jacked up" (only in relation to silver) far beyond its long term average of 16 to 1.  The second information when gold is at lofty levels to silver there is systemic risk of large proportion some where in the world as players are demanding gold(safe haven money).  I've said many times the European Union could very well fly apart and the Italian banks are the soft underbelly of Europe.  Any big crack up in the financial world will most likely start in Europe especially Italy.

For those of you who purchase physical gold and silver you may want to sell off some of your gold and purchase silver it is currently the better bargain or at least confine your new purchases to silver.

The link below will give you a good starting point explanation regarding this ratio.

Gold to Silver Ratio

DYI