Italy Money Supply Plunge Flashes Red Warning Signals!

• You cannot convince me everything will work out for the Eurozone. I am absolutely certain the sovereign debt bomb will explode in the PIIGS and bring down the Eurozone. It will spread to UK, Japan and finally USA. The entire world is about to be engulfed in economic, financial and monetary Armageddon. The question is when and not whether! It can happen at any moment! Got gold yet? Gold is insurance against this! (emphasis mine)
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  Italy money supply plunge flashes red warning signals
  By Ambrose Evans-Pritchard, http://www.telegraph.co.uk/
  Monetary experts are increasingly disturbed by the pace of money supply contraction in Italy and most recently France, fearing that it could prove a leading edge of a sharp economic slowdown over the winter.
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  “Real M1 deposits in Italy have fallen at an annual rate of 7pc over the last six months, faster than during the build-up to the great recession in 2008,” said Simon Ward from Henderson Global Investors.
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  Such a dramatic contraction of M1 cash and overnight deposits typically heralds a slump six to 12 months later. Italy’s economy is already vulnerable – industrial output fell 0.6pc in May, and the forward looking PMI surveys have dropped below the recession line.
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  “What is disturbing is that the numbers in the core eurozone have started to deteriorate sharply as well. Central banks normally back-pedal or reverse policy when M1 starts to fall, so it is amazing that the European Central Bank went ahead with a rate rise this month,” Mr Ward said.
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  Italy is not a high-debt nation. Italian households are frugal by Spanish and UK standards. However, Italy has a toxic trifecta of problems that affect long-term debt dynamics: a public debt stock of €1.8 trillion or 120pc of GDP; rising interest rates; and economic stagnation. It is the interplay of these elements that has set off flight from Italian bonds.
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  Italy has to roll over or raise €1 trillion over the next five years, with a big spike as soon as August. “Any new issuance will be above the average rate. That is the real cause of the destructive market action,” said Paul Schofield from Cititgroup.
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  … RBS said the eurozone storm is far from over. “We expect the crisis to continue deteriorating, and threaten to undermine the entire euro area as European policy-makers still misunderstand market dynamics. They show no sign of catching up with reality,” said Jacques Cailloux, the bank’s Europe economist.
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  The real M1 data show countries are vulnerable. There have been sharp contractions in Austria and Belgium. The Netherlands and Germany are negative. The ECB believes sluggish money supply figures reflect the reduction of an “overhang of liquidity” left from before the crisis and are benign. The claim has raised eyebrows among monetarists.
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  Tim Congdon from International Monetary Research said the ECB had drifted away from monetary orthodoxy after the departure of Otmar Issing as chief economist in 2006, tolerating “crazy lurches” in the broad M3 money supply. “The ECB did not see the collapse in money growth in 2008 and the great recession that followed, and they are getting it wrong again.”

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