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The Passion of Monti: A Christmas Story

Marc To Market's picture





 

The political dysfunction of the world's largest economy is epic.  Even though Mr. Market is not forcing the US hand, the political class is intent on shooting itself in the foot.  Yet the uncertainty over next year's marginal tax rates has not impacted the hiring process as the average monthly non-farm payroll growth has not diminished.  Nor have investment plans been adversely impacted.  Non-defense durable goods orders, excluding aircraft, a useful proxy for capital investment, rose 2.7% in November after posting a 3.2% increase in October.   

 

Italy is not as fortunate.  Its economy is contracting.  Mr Market is likely to be less patient.  Although Italy's net debt issuance in 2013 appears less than in 2012, there is little room for error.  

 

Monti was looked upon as the savior of Italy after Berlusconi had undermined its gravitas on the world stage with his antics that are unbecoming of a man of his stature.   Yet Monti took his role too seriously and not seriously enough.  

 

The Bible says it took Jesus 40 days in the desert to decide between an earthly kingdom and the heavenly one.  It took Monti about 48 hours from the time he submitted his resignation until his press conference where he offered his support to those who pick up his Cross reform agenda.  At precisely the moment in time, when the Italian people need the earthly bread, Monti demands sacrifice in exchange for his blessing and a vague promise of a better life thereafter.    

 

Monti is too much the Other.  He puts himself above Italy and the Italian people.  Politics, which the ancient Greeks taught the ancient Romans, is the sphere of freedom and through it people shaped the community in which they lived.  Monti is too pure for Italian politics and the compromises that it requires.  

 

By insisting that his virtue remains beyond reproach, Monti is willing to see Italy return to the hands of those that would defile it.   Monti's reform agenda never had deep democratic roots.  His ascent to the premier's office was not a function of an election, but a deal worked out among the major political parties after Berlusconi resigned amid scandal and crisis.   His agenda was implemented largely by decree.  He often demanded votes of confidence on measures that forced agreement from a reluctant parliament.  Monti's public support began slipping shortly after his ascension. 

 

Over a hundred years ago, William Jennings Bryan harangued against crucifying America on a cross of gold.  Now Monti is willing to crucify himself to preserve his sanctity.  Yet his holiness has little value ,if it condemns his country to greater trials and tribulations, except for his own salvation.  

 

Monti did not seek allies and get "buy-ins" for his agenda.  This places at risk his accomplishments over the past year.  While center-left and center-right parties may endorse some parts of Monti's program, it seems like political suicide for any party to endorse it lock, stock and barrel. 

 

His reforms are not a sacred text.  Berlusconi, as vile of a character as he may be, is politically astute in ways that Monti cannot even fathom.  He chose the timing of Monti's downfall, catching the premier seemingly unprepared.    It is Monti that says he will not serve.  Berlusconi is all too happy to be prime minister again.  He would dismantle much of what Monti built and he would do it in the people's name. 

 

It is Monti, for example, that re-introduced a tax on the Church's commercial properties, which Berlusconi had previously eliminated.  In addition, Berlusconi has already indicated he would repeal the new real estate tax, which is understandably terribly unpopular, and boost the sin tax on alcohol and tobacco.  

 

Monti enjoys and values a camaraderie with the European political elite that Berlusconi mocks.  Monti sought to soften the German demands for austerity, and the letter of the treaties, by invoking the spirit.  Yet he has little concrete to show for it.  The biggest reason that the monetary union survived 2012 was due to the actions of his countryman, ECB President Draghi, who incidentally was accused by Bundesbank President Weidmann of also circumventing democratic principles.  

 

Berlusconi would challenge Merkel in a way that Monti would never dare.  Following the political commandment that "an enemy of my enemy is my friend",  Berlusconi may reinvigorate the Mediterranean axis and join forces with France and Spain to counter Germany.  

 

The polls suggest the PD, under Bersani, is still poised to secure the most votes in Italy's election in late February.  It says much about the condition of Italian politics (and perhaps by extension European politics) that the former communist was among Monti's most ardent supporters over the past year.   Endorsing Monti would not likely increase Bersani's public support, and could cost him.   Monti must indeed be suffering from delusions of grandeur if he thinks Bersani will move aside for Him.  

 

Without seeking to maintain a strong and powerful presence in Italy's politics, Monti has no way of ensuring that his program develops the kind of democratic roots necessary to endure.   His acknowledgment that sometimes Berlusconi is incomprehensible says just as much about Monti as it does Berlusconi.  

 

Monti may be good for Italy, but the Italian people are worse off now than a year ago.  Interest rates are lower and the equity market higher, but unemployment is higher and the economy continues to contract.  The basket of goods citizens get from the state has been reduced and the price of the basket has increased.   If the Italian people are to be saved, they need to understand how Monti's reform agenda will mean a better life for them and their children.  Yet for all Monti's effort, he might as well be speaking Latin.  

 

If Monti had tougher skin, like Berlusconi, he would not have been put off by the poll that found some 61% of Italians do not want him to run for premier.  Given the fractious nature of Italian politics, the 39% that do, would make Monti a power to be reckoned with and that is without even trying to present his case to the Italian people.   It is more support than the Man and Party of 12 had a couple of millennium ago.  

 


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Wed, 12/26/2012 - 10:24 | Link to Comment Orly
Orly's picture

I can't tell whether Marc is ridiculing Monti or praising him.

On the one hand, he laughs at his elitist Goldman bent as a hopeless, unelected technocrat, while on the other seems to say that his ideas would work but were never given a chance.

If Monti were only a thicker-skinned politician, we wouldn't have this mess because he should shove the "reforms" down the throat of Italy and not care what a majority of the people think.

I'm confused.

:/

Wed, 12/26/2012 - 11:34 | Link to Comment Marc To Market
Marc To Market's picture

Orly, I did not mean to ridicule Monti, but to take him seriously and locate him within one of his greater influences--the Church (not his previous consulting gigs, like Goldman).   I tried to offer a nuanced view of Monti and Italy.  I find it too simplistic (and I think investors and others should too) whether Monti is a good guy or bad guy.   I suggest his failure is not having more democratic roots to his reforms and his refusal to immerse himself in politics, which is, as I suggest, understood classically as the realm of freedom --shaping the community in which one lives-.     He did shove the reforms down the throat of Italy (which was my point of ruling by decree and failure to build durable coalitions).   I try to argue that Monti failed to lead by explaining and convincing the Italian people why his path is better than Berlusconi.  I hope I did not suggest that the problem with Monti's austerity is that it did not have time to work.  

Wed, 12/26/2012 - 12:16 | Link to Comment Orly
Orly's picture

Thanks so much for the response.  (I really enjoyed the book, by the way.  It was very enlightening...)

The way the piece was written was surprising in the way you attributed to Monti a sanctimonious attitude.  The way I read it was that Monti has an undying, elitist hubris by way of detachment from "ordinary" Italians and I simply assumed that he would have learned such things in the ethereal circles of bankers and billionaires.

What I am hearing you say now, though, is that his ideas and moral characater are more in line with the Christian values ostensibly espoused by the Catholic Church than the Church is itself.  That is a surprise and a welcome one at that.

If his way of thinking brings about gearing Law toward fairness and equality in the way JudeoChristian ideas should be implemented instead of how the rules have been warped to wrap the Ten Commandments around the bad-fitting suit of our modern society, then it is something that should be encouraged.

It is ironic that he is pitted up against a self-indulgent, convicted child-molester and the people of our modern world are not certain whom they would choose!  It's just crazy.

This is a new way to look at Mario Monti that I have not heard before and should be given more respect, if my assessment is true.  If his place is not with the Church itself (after all, he raised taxes on them...) and they are instead with the fairness and goodness that comes with a spirited man, then I am all for it.

Again, thanks for the insight.  You bring us information and ideas we don't get every day and I appreciate it very much.

Have a happy holiday season and a wonderful New Year!

:D

Tue, 12/25/2012 - 12:26 | Link to Comment virgilcaine
virgilcaine's picture

Any Country that would reelect Bungha Berlusconi is beyond hope. But at least he is one of their own.

Tue, 12/25/2012 - 12:23 | Link to Comment SubjectivObject
SubjectivObject's picture

I'm confused. 

Is/Was 'nt Monti a G'd man?  Ora BG'd man?

Is this simply yet another passion play between banksters, mafioso, and clergioso?

Or whose corruption rulz!

While we/peons watch.

A three shell monti.

Tue, 12/25/2012 - 10:47 | Link to Comment TrustWho
TrustWho's picture

I think you captured the mindset of Monti perfectly. I would extend this mindset to all the political crony elite throughtout the west. The american election process is a farce. For example, was the fiscal cliff ever discussed? No, America would rather discuss how republicans are going to take women's contraception, including abortion, away from women. The elite play a clever 3 card Monti game well. However, they lead us all to our destruction! 

Tue, 12/25/2012 - 10:09 | Link to Comment supermaxedout
supermaxedout's picture

Monti is trying to modernize Italy and to cut back corruption and the power of the old elites including the Vatican.  

His model is Germany and the bulk of the Italians are willing to follow his idea.  Northern Italy is not that much different from Switzerland and Southern Germany. Modern industries do produce goods which are competitive in the worlds market. The south of Italy and Rome is different. This is clearly Berlusconi, Vatican , old families and Mafia country. But even these groups do admit that something in Italy has to change and that the future of Italy is tightly connected with the Eurozone, with Germany as the most influential part.  At least they are Italians and love their country as a whole.

You are writing: It is Monti, for example, that re-introduced a tax on the Church's commercial properties, which Berlusconi had previously eliminated.  In addition, Berlusconi has already indicated he would repeal the new real estate tax, which is understandably terribly unpopular, and boost the sin tax on alcohol and tobacco. 

And here you are naming the most important force which is not going along with Monti. The Catholic Church. To understand this,  one must know, that in Italy there exists no such thing as a real estate tax.  The cadastry or land registry books in Italy are not continuosly updated. It is not mandatory to give notice to the cadastry if one buys or sells a piece of land.   One can sell his land on a piece of paper, have it signed by two witnesses, get the cash and the deal is done and valid.

So nobody knows in Italy who owns what land or property because the land registers are not updated partially through centuries. But of course the locals know who owns it and who is using it. And there exist estimates, that approx. 50% of all the land and houses in Italy belong to the Catholic Church. This was calculated based on the "realities" in several "model communities".

Guess what would happen if it would become mandatory that all land sales have to be registered and the registry have now all to be updated in order to show the present owner. Plus a real estate tax would be introduced. Plus fees for garbage collection etc.  would then be connected to the property and not paid anonymously by the communities. These two measures would increase dramaticlly the revenue of the state and communities while hitting the big landowners which are the mafia and the Church. The mafia could not anymore hide their black economy profits in real estates and the church would have to open their books too. There exists officially since long a tax  when somebody buys real estate. Its high, appx. 20% of the transaction value. That is another reason why nobody likes to have his ownership rights registered in the land registry, it saves 20% on the purchase price.  Only the little guys have to pay, buying their appartment or house with a credit so they can not avoid the registry procedure otherwise the bank would not give a credit.

All in all it can be stated, that the biggest enemy of transparancy in the Italian real estate market are the Catholic Church and the Mafia. And these are indeed as you stated very influential enemies. Berlusconi is just an important figure in this game but the real fight for power is between the institutions:  The Church and the Mafia on one side and the Democratic Institutions representing the Italian population on the other.  Guess who is winning ? Nobody ! it is going to be a compromise otherwise the country would be teared apart. And the Italians know this. So dont worry about Italy, they will manage.

 

 

Wed, 12/26/2012 - 10:18 | Link to Comment Orly
Orly's picture

Excellent information.  Thanks.

Notice how it always cmes down to obfuscation to know how these people are getting paid and holding their wealth?  In the US, it is through back-door insurance deals that patients never see but are, instead, paid through to major hospital corporations.  No one sees the transaction in daylight.

Another example is MERS and the robo-signing.  More back-door, smoke-filled-room, secret transactions.  Hot potato and no one knows who owns what.  Hmmm.  Seems to be a pattern here...

You are correct in saying that in order to make a true accounting, everything must be brought into the light of day, including the centuries-old holdings of the "sacred" Catholic church.  The sinister machinations of the Black Hand must be recognised and accounted for, as well.

Governments and their laws have been set up to adorn this obfuscation with trinkets of servitude to show that it works and, as you rightly point out that it is the little guy, in Italy and everywhere else in the world who stands as the example of how the government is doing their job.  They get nailed on an apartment tax, while the Church pays nothing on 775 Tuscan acres.

We all know that the law is not distributed fairly.  Everyone knows that there is a two-tier system of rules.  In order for governments to function properly, this must end abruptly and the rule of Law applied to everyone equally.

:D

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