At yet another useless G-20 meeting, Italy’s finance minister, Pier Carlo Padoan, made an official denial regarding the plight of Italian banks:
“There is no risk in terms of systemic stability,” said Padoan. Supposedly, everything is “contained“.
Praise for Lies and Useless Talk
The New York Times reports Group of 20 Will Use ‘All Policy Tools’ to Lift Growth.
Actually, the only policy tools central banks are likely to use are tools that have long-term negative consequences such as negative interest rates and competitive currency devaluations.
Also expect a bunch of useless yap about forward guidance that is nearly always wrong.
Philip Hammond, Britain’s new Chancellor, chimed in with a messages about uncertainty.
“What will start to reduce uncertainty is when we are able to set out more clearly the kind of arrangement we envisage going forward with the European Union,” Hammond told reporters.
Just Do It
In the communique, the G20 underscored “the role of open trade policies and a strong and secure global trading system in promoting inclusive global economic growth, and we will make further efforts to revitalise global trade and lift investment”.
Rather than discussing the role of open trade, how about doing it? Let’s see the US and UK throw away their agricultural tariffs. Let’s stop 500% tariffs on Chinese steel.
None of that is going to happen. The US always says it will revise agricultural policy if the EU does. But the EU won’t because of France.
The EU is a mad basket of growth-inhibiting policies. And individual nations like Italy, Greece, and France have horrendous productivity issues.
Denial of the Obvious
The Financial Times reports Pier Carlo Padoan Rejects Need for Italian Banks Bail-In.
Pier Carlo Padoan, the Italian finance minister, has denied that Italy’s banks are suffering from systemic problems and rejected a “bail-in” of private investors as he sought to reassure global markets over the state of Italy’s financial institutions.
“We are going in the right direction, there is no risk in terms of systemic stability,” Mr Padoan said at the end of the G20 meeting of finance ministers and central bank chiefs in the Chinese city of Chengdu on Sunday, adding that there were a few “contained” critical cases.
The Italian reassurances came as the G20 pledged to use “all policy tools” to support growth, saying they were ready to respond to any negative fallout from Brexit amid uncertainty over protectionism and Britain’s future relations with the EU.
Mr Padoan’s comments come ahead of a key week for Italian banks, which will be closely watched when the results of European-wide stress tests are published on Friday, possibly leading one or more of them to rush to raise new capital.
Plight of Italian Banks
For the laughable denial of the plight of Italian banks please consider any of the following:
- April 10: Italy Seeks “Last Resort” Bailout Fund to “Ringfence” Troubled Banks, Meeting Monday; Italy vs. Austria
- May 5: Atlas Crumbles Under Weight of Italian Banks
- June 30: Italy’s Zombie Banks on Death Bed, Bail-Ins Coming?
- July 4: Merkel-Renzi Showdown: Italy Threatens to Defy Merkel, Brussels Over bank Bailouts
- July 20: Atlas Rescue Phase II: Italy Eyes Another Private Deal to Bail Out Banks
Monetary Policy Not the Cure
Monetary policy is not the cure for what ails the global economy, and Europe in particular.
If the G20 really wanted to do something it would embrace free trade straight up, make it easier for companies to start and do business.
For discussion, please see Ease in Doing and Starting a Business: US and UK vs. Europe, Rest of World.
Mike “Mish” Shedlock