Markets ignore Italy election results

Close on the heels of my posting on the review by J.W. Mason of Varoufakis’ book, I thought it would make sense to post on the Italy election results which saw both the ‘Five Star’ party and ‘Northern League’ perform far better than expected. It is a bad result. Italy is an important part of Eurozone. Germany finally has a Chancellor but the coalition is fragile. Spain has not really settled the Catalonia issue. Markets are fixated on Trump tariffs and hence pushed the EURUSD higher. That sounds silly, to me.

FT has a good story on the election results and if that is buried behind a paywall, see here. I think the complacency of financial markets provides avenues for exits.

Ferdinando Giugliano has a good piece in Bloomberg Views. That should be accessible to all.

This line struck a chord:

they have sold the electorate a future made up of free money.

Well, ambitious politicians; desperate promises and desperate hopes – not just the prerogative of developing countries.

2 thoughts on “Markets ignore Italy election results

  1. Its only a bad result if one thinks the Euro is a good idea or that the EU bureaucracy is doing a good job or that open borders are a great idea. Despite the racist elements in the mix, more local accountability should be a good thing…

    In any case, the populists will dilute their campaign promises when they get to govern. At the moment, populism isn’t much more than a power grab with some tweaks at the margin to the globalist, corrupt elite policy framework.

    And, I’m not sure if the EURUSD rise is unreasonable. If a weak country leaves the union, the currency should appreciate. Worst case, if everyone leaves and the Euro devolves into the Deutsche Mark, it should appreciate.

    The Goldman analysis is so funny. You would think that inflationary policies would be welcomed when deflation has been the scare for the last decade! Heck, makes me wonder why weren’t tariffs considered in 2008-09?! It would have helped with the deflation problem. And, the analysis is to the point, globalism has benefited the American consumer with persistently low inflation, but is that what the country should desire? More and more consumption to the point of over-leverage at the expense of local production even though it might be a small number of jobs?!

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    1. And, the real issue with tariffs isn’t just about saving some local jobs, it is in response to illiberal policies in other countries. Why isn’t that up for discussion? Clearly the stick of tariffs has the benefit of pushing other countries to reciprocate with a freer economy of their own. Why is it only the US which has to provide for open markets in products and labor but not other countries? Why is it not a black day for the world when China restricts Google or when a liberal blogger is killed in Bangladesh?

      And, the alarmism is also stupid for the reason that negotiation requires a stick and carrot approach. It is a much needed approach that promises to end the asymmetric globalism we have currently where we have countries with pathetic human rights records like KSA and China and India enjoying the fruits of free trade without having to free their own populations. That had to end 10 years ago. And, a stick approach might just help. The west will trade free trade for liberalism and human right reforms – how’s that for a new more just, accountable paradigm instead?

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