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How to Ruin Italy
Italy is the victim of an entirely inappropriate monetary policy. The country needs ultra-loose money to offset €48bn of fiscal tightening and stave off a bond crisis. Instead it gets this, (from the Banca d’Italia): Italy’s real M1 deposits have been contracting at a 7pc rate over recent months, and M3 is not far behind. This is catastrophic. The ECB could prevent such a downward spiral. It chooses not to do so, and is therefore pushing Italy ever closer to the brink. (Yields have fallen slightly today on the relief rally from the US debt deal, but 10-years are still unsustainably high at 5.71pc). This ECB ... (full story)
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