Forex Market Commentaries - Italian Cash Society

All Your Cash, Are Belong To Us Mario Monti Takes On The Italian Cash Society

Dec 23 • Market Commentaries • 2849 Views • 1 Comment on All Your Cash, Are Belong To Us Mario Monti Takes On The Italian Cash Society

“All your base are belong to us” (often shortened to “All Your Base”, “AYBABTU”) is a broken English phrase that became an Internet phenomenon in 2000–2002. The text comes from the opening cutscene of the 1991 European Sega Mega Drive version of the video game Zero Wing which was poorly translated from Japanese…

It’s only taken the former (if there is ever such a thing) Goldman Sachs banker and now unelected technocratic Italian Prime Minister a month to threaten Italians with regards to their cash economy. Not even Silvio dared to adopt such an breath taking reforms, although he had his personal reasons for his preferences and cash paying history. Mario Monti quickly realised that the Italians love affair with their lire now extends to the euro. Despite their distrust of banks being amplified during the current crisis he’s beginning to issue autocratic diktat regarding the cash society that lives, breathes and is at the heart of the Italian economy. The government on Dec. 4 reduced the maximum allowed cash payment to 1,000 euros from 2,500 euros.

Italy apparently loses more than 120 billion euros in unpaid taxes every year, according to the Italian tax collection agency. The country spends circa 10 billion euros annually on security and labor in order to process cash transactions, according to the Italian banking association, the ABI.

Monti is now focusing on curtailing evasion as one way to reduce Italy’s 1.9 trillion-euro debt, which is bigger than Spain, Greece, Ireland and Portugal’s combined. Investor concern that Italy remains at risk of being overwhelmed by the region’s debt crisis pushed the country’s borrowing costs to euro-era records last month.

However, a money grab of the cash in society must be irresistible to a confirmed banker who no doubt sees billions of turnover in the cash society and wants it to be continually washed through the banking system, as part of the ‘healing’ process for a crippled economy and country.

Italians are the euro region’s least-indebted consumers and among its biggest savers, according to Eurostat. data from the European Union’s statistics office. Their frugal nature is linked to a distrust of paying with anything other than cash. Italian credit-card holders use their cards on average only 26 times per year, or five times less than in the U.K., according to the Bank of Italy. And who could blame Italians for not trusting the banking system during the current malaise? With interest rates at less than one percent putting cash to work is seen as a sensible basic street level hedge versus inflation. A culture of investing in the equities market doesn’t exist in Italy in comparison to for example the UK and USA, and if it did Italians would find their investments, if tracking the MIB index, down by 27% year on year.

But now Monti has made the public “an offer they can’t refuse”, by criminalising cash transactions of more than €1,000, he’s increased distrust and heightened suspicions as to his real motives as opposed to engendering the support he desperately needs. There’s no direct translation for “all your cash are belong to us” but the street-wise Italians won’t be easily fooled..

 

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Market Overview
Stocks rose for a fourth day, U.S. equity-index futures rallied and the dollar fell on signs the world’s largest economy is recovering and as takeovers increased. Commodities climbed as oil headed for the biggest weekly gain in almost two months.

The MSCI All Country World Index advanced 0.4 percent at 8:45 a.m. in London, set for the longest winning streak since Dec. 5. Standard & Poor’s 500 Index futures increased 0.5 percent and Treasury 10-year yields climbed one basis point. The Dollar Index slid 0.2 percent, while South Korea’s won strengthened 0.5 percent. Oil was up a fifth day in New York and copper added 0.9 percent in London.

The Stoxx Europe 600 Index rose 0.7 percent, taking its weekly advance to 3.3 percent. The MSCI Asia Pacific excluding Japan index added 1.4 percent. Australia’s S&P/ASX 200 Index rose 1.2 percent as Gloucester Coal surged 22 percent after China’s Yanzhou Coal agreed to buy the Sydney-based company for A$2.1 billion ($2.13 billion) in cash and shares. Yanzhou Coal jumped 6.6 percent in Hong Kong.

The dollar headed for weekly declines against 14 of its 16 major peers. The currency fell to 78.04 yen and weakened 0.2 percent to $1.3078 against the euro.

Oil futures in New York rose as much as 0.7 percent to $100.23 a barrel. Futures have jumped 6.7 percent this week, set for the largest increase since the five days ended Oct. 28. Copper in London gained 0.9 percent to $7,611 a metric ton, climbing for a fourth day, the longest increase since October. The metal is poised for a 3.5 percent rise this week, the first increase in three weeks.

Market snapshot at 9:45 am GMT (UK time)

The Asian Pacific markets ‘enjoyed’ mixed fortunes in overnight/early morning trade; the Nikkei fell by 0.77%, the Hang Seng closed up 1.37% and the CSI closed up 0.76%. The ASX 200 closed up 1.21%. European markets have been steady in the morning session; the STOXX 50 is up 0.63%, the UK FTSE is up 0.42%, the CAC is up 0.74%, the DAX is up 0.28% the Portuguese index the PSI is up 1.52% but down 31.52% year on year.

Economic calendar releases that may affect sentiment in the afternoon session

13:30 US – Durable Goods Orders November
13:30 US – Personal Income November
13:30 US – Personal Spending November
15:00 US – New Home Sales November

Analysts surveyed by Bloomberg gave a median forecast of +2.20% for durable goods orders, compared with the last release which was revised to -0.50%. Excluding transportation, the expectation is for +0.40%, down from a revised +1.10%. Personal spending is predicted ar +0.30% compared with a previous figure of +0.10%. A poll of economists showed a median prediction of 315,000 new home sales, compared with 307,000 last month.

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