Wednesday 16 May 2018
Italy, oil, US muni taxes
The EU crisis was always going to be politically triggered, not economics or markets triggered, something many finance people could not understand for years. David Cameron got a zero when asking for reforms. But Italy is big enough to trigger an existential showdown with the European Commission and their compromised politician front men.
Italy's TARGET2 imbalance is already €444bn, or 24% of GDP on €2.1Tn of debt and a €1.9Tn economy. As Varoufakis said, Greece's mistake was not defaulting on the ECB. Italian government spends over 48% of GDP and is in breach of Maastricht debt levels by more than 2x, having run >3% deficits many years since joining the EZ.
The two parties seem to have agreed on a further stimulus plan so far as the high debt levels are currently showing up as deflationary.
Nevertheless, if you are bored of London, they are offering a Non-Dom deal.
Looks like shale growth will overtake demand growth with the former revising higher and the latter set to be revised lower on EM wobbles... Hard to understand why oil is sitting at $78 or so right now. Could plunge back to the 50s to choke off shale growth easily enough.
Illinois and other bankrupt municipalities
What is Illinois considering to do to plug a huge pension deficit? Hint: it's not reducing spending or gilt edged pension benefits. People are moving out of high cost and high tax areas already. Amusingly Puerto Rico is now the lowest tax place you can go to in the US.