Monday, December 5, 2011

We Are All Italian Now

When my daughter and I were in Italy last year, she introduced me to a Bed and Breakfast host. Funnily, she used the incorrect word for 'father'; she called me "The Pope".

But I for one am not ready to be Pope, or for that matter so close to the Italians that I want to give freely of my time and money to help them out of this current debt crisis.

But this is exactly what is about to happen it seems. And not only me, but my children and grandchildren are being called upon to help as well.

You see, the IMF (International Monetary Fund) is asking New Zealand to contribute $1.3 billion to a fund to bail-out Italy.

Now Italy is a lovely place, it has beautiful architecture and art and a wonderful history. In many ways, we owe  much to the Roman Empire. You will recall the very first treaty that began the current European experiment was called The Treaty of Rome. Many Italians emigrated all over the world and gave much flavour to cities like New York and  Melbourne, Australia.

So what are we to do? Give the IMF and the Italians the big ‘whato’ and tell them to go fish or do we just play the game? The game with  the rules we don't make because we don't have a voice or a choice?

It appears we will not have our democratic right to vote on this huge proposal. As I've said before, the borrower is slave to the lender. Democratic rights are first to go when you borrow money. Most other rights follow.

New Zealand borrowed $20 billion to June 30th, 2011 and will borrow 'only' $8 billion this year. John English, the Finance Minister, is confident we can ride out this period of European instability because we don't require so much new debt. Hmm, you gotta love the spin. Borrowing is at an all-time mega-high, but we will survive shocks as we have borrowed so much previously. In other words, we can keep the spending going that people expect, on social welfare, health spending and large government agencies. Nothing to see here folks, move along.

Then we keep hearing that our banks are in better shape than in the days of the Lehman's collapse in 2008. Yet those days were full of easy, cheap money. Now, re-financing costs are going to soar with risk gathering pace in world money markets.

But back to Italy. Here we are, at a point of bailing out a first-world economy. The little old New Zealand taxpayer is going to be on the hook for $1.3 billion. All of it we will never see as roads, hospitals, power stations etc. Yet you and I, our children and their children will have to pay it back. I'm not going to be too harsh on the Italians, but why should we pay for their lavish overspending? Overspending from  a government who created words like bunga-bunga. Perhaps we asked the same questions when we sent our finest young men to die in Italy over 70 years ago? But we still went and helped, and I guess we will help again this time.

I hope Italy remembers little old New Zealand at the bottom of the world when we need them.


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Silver in New Zealand dollars: $42.01 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)

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