FX MACROECONOMICS by Ellen Brown


The Italian Banking Crisis: No Free Lunch Or Is There?


It has been called “a bigger risk than Brexit”– the Italian banking crisis that could take down the Eurozone. Handwringing officials say “there is no free lunch” and “no magic bullet.” But UK Prof. Richard Werner says the magic bullet is just being ignored.


On December 4, 2016, Italian voters rejected a referendum to amend their constitution to give the government more power, and the Italian prime minister resigned. Te resulting chaos has pushed Italy’s already-troubled banks into bankruptcy. First on the chopping block is the 500 year old Banca Monte dei Paschi di Siena SpA (BMP), the oldest surviving bank in the world and the third largest bank in Italy. Te concern is that its loss could


64 FX TRADER MAGAZINE January - March 2017


trigger the collapse of other banks and even of the eurozone itself.


Tere seems little doubt that BMP and other insolvent banks will be rescued. Te biggest banks are always rescued, no matter how negligent or corrupt, because in our existing system, banks create the money we use in trade. Virtually the entire money supply is now created by banks when they make loans, as the Bank of England


has acknowledged. When the banks collapse, economies collapse, because bank-created money is the grease that oils the wheels of production.


So the Italian banks will no doubt be rescued. Te question is, how? Normally, distressed banks can raise cash by selling their non-performing loans


(NPLs) to other investors


at a discount; but recovery on the mountain of Italian bad debts is so


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