"Fiscal Money" - A Parallel Currency For Italy Is Possible

Authored by Biagio Bassone, Marco Cattaneo, Massimo Costa, and Stefano Sylos Labini, via Politico.eu,

Rome can regain control of its monetary policy without breaking the rules of the eurozone...

In Joseph Stiglitz’s recent article for the POLITICO Global Policy Lab (“How to Exit the Eurozone,” June 29, 2018), the Nobel-prize wining economist proposes that Italy issue a parallel currency as a way to retake control of its monetary policy.

It’s an insightful idea, and one worth exploring. However, Stiglitz is wrong when he suggests that “introducing a parallel currency, even informally, would almost certainly violate the eurozone’s rules and certainly be against its spirit.”

Our organization - the Group of Fiscal Money - has been very active in developing and promoting such a dual-currency scheme.

We call it “Fiscal Money” and believe it could be used to avoid the uncertainties of exiting the euro while allowing Italy to recover economically without breaking any EU rule.

Our proposal is for government to issue transferable and negotiable bonds, which bearers can use for tax rebates two years after issuance. Such bonds would carry immediate value, since they would incorporate sure claims to future fiscal savings. They could be immediately exchanged against euros in the financial market or used (in parallel to the euro) to purchase goods and services.

Fiscal Money would be allocated, free of charge, to supplement employees’ income, to fund public investments and social spending programs, and to reduce enterprises’ tax on labor. These allocations would increase domestic demand and (by mimicking an exchange-rate devaluation) improve enterprise competitiveness through a reduction in the cost of labor. As a result, Italy’s output gap - that is, the difference between potential and actual GDP - would close without affecting the country’s external balance.

Unlike Stiglitz’s conclusion, our proposal is fully consistent with the rules of the eurozone and might very well be a permanent set-up for the whole eurozone going forward.

Note that under Eurostat rules, Fiscal Money bonds would not constitute debt, since the issuer would be under no obligation to reimburse them in cash. Also, as non-payable tax assets (of which many examples already exist), they would not be recorded in the budget until used for tax rebates — that is, two years after issuance when output and fiscal revenue have recovered.

While we verified this debt-related issue extensively from both the legal and accounting standpoint, it is also important to add that the reason for not including non-payable tax liabilities (and Fiscal Money as such) in a country’s public debt calculations under the Maastricht treaty is a matter of substance, not just of form. The reason is that a non-payable liability does not bear any default risk due to the lack of repayment capacity from the liability issuer.

Based on conservative assumptions, we calculate that Italy’s GDP growth over the two-year time period would generate additional tax revenues sufficient to offset the tax rebates. Projections show that these would peak at around €100 billion per year, compared to Italy’s total government revenue of more than €800 billion. Thus, the cover ratio (that is, the ratio between government gross receipts and tax rebates coming due each year) would be large enough to accommodate for possible shortfalls due to future recessions.

In any case, safeguards would be provided within the law governing Fiscal Money to ensure Italy’s full compliance with EU fiscal rules. Such measures would consist of spending cuts and/or tax adjustments that would be triggered automatically in the event of fiscal underperformance, compensated by additional issuances of Fiscal Money in favor of those who would be otherwise hit by the fiscal adjustment. The high cover ratio would afford enough space for this.

By activating a Fiscal Money program, Italy would solve its output gap problem without asking anything of anybody. No European treaty revisions would be required. No financial transfers would be needed. Public debt would stop growing and start declining relative to GDP, thus attaining the EU fiscal goals under the Maastricht Treaty.

Have we found the philosopher’s stone? Certainly not - but in an economy with large resource slack, the multiplier works its effects largely on output and moderately on price. And if external leakages are contained (which increased competitiveness would do), the multiplier effects are the highest. Fiscal Money will mobilize unutilized resources, accelerate investments and induce banks to resume lending.

The downside is nearly nil. Even if Italy were to lessen its fiscal discipline and decide to over-issue Fiscal Money, only its recipients would take the hit; the value of dual currency would fall but the value of the euro would be unaffected. Nor would there be default risk on a default-free instrument.

In any case, the large cover ratio would make this scenario totally unlikely. Besides, it is only fair to remember that Italy’s inability to rein in net public spending is a false myth. Between 1998-2017, Italy was the only eurozone country to never run a primary budget deficit (other than in 2009). If anything, Italy has suffered from excessive public budget restraint, which has led to its dramatic output decline.

Unlike Stiglitz’s conclusion, our proposal is fully consistent with the rules of the eurozone and might very well be a permanent set-up for the whole eurozone going forward.

*  *  *

Biagio Bossone

Marco Cattaneo

Massimo Costa

Stefano Sylos Labini

Members of the Group of Fiscal Money
Milan, Italy


DownWithYogaPants _ConanTheLiber… Tue, 07/10/2018 - 05:30 Permalink

Brilliant idea but the Rothschilds are not going to give up their control of the right to issue money in the EU without a fight.

Ain't that the truth?

Why anyone would want to be part of the Eurozone I do not know. It's a losing deal for anyone but the very top of a country. It's ok for them because they are heavily bought off by the Rothschild Private Central Banking Cartel Mafia.

But then again I do not see it as beyond the Banking Cartel to figure out a way to get a percentage of the action.  Their whole careers are based on it.

In reply to by _ConanTheLiber…

rf80412 Troy Ounce Tue, 07/10/2018 - 11:14 Permalink

I think Gresham's law is kinda the point.  Release a cheap currency for financing the government (paying government workers and contractors, paying taxes, etc.), buying and selling domestically, and selling abroad to make the Italian economy more competitive, and Italians save the more valuable Deutscheuro for buying abroad, which is otherwise the challenge when your national currency is cheap.

In reply to by Troy Ounce

East Indian DownWithYogaPants Tue, 07/10/2018 - 11:17 Permalink

Brilliant idea?

What is proposed is to print promissory notes (fiat) adjustable against the taxes two years from now, (hence future tax revenue is forfeited) to be distributed to "employees" (Universal Basic Income?). The Government loses future revenue in return for nothing, no, worse, after spending money to print and distribute these fliers. 

A nice combination of lose - lose - lose. 


In reply to by DownWithYogaPants

luckylongshot East Indian Wed, 07/11/2018 - 03:22 Permalink

If you make the effort to research what has happened in major economies that introduced sovereign money it is impossible to reach any other conclusion than that it was a brilliant move. What occurred includes the following 

žNo income tax-US Pennsylvania

žžNo more depressions or hyperinflations-Europe 500 years without a depression

žPeople may only need to work 14 weeks a year -Europe

žNo poor-Europe

žInstantly you would be able to buy 50% more for the same money

•35-40% of everything we buy goes to the banks (Kreutz, 2006; Kennedy, 2012)

žFree education-US

žA dramatic reduction in wars

žNo unemployment- US and UK

žSecurity in old age and in sickness- China

žGeneral prosperity, we would thrive.

In reply to by East Indian

DownWithYogaPants LordWillingly Tue, 07/10/2018 - 05:33 Permalink

There is no reason for you to think you're so smart.  We Trumptards are a lot smarter than you.  

Not only do we have simple geography down we also do trigonometry and geometry.  How many foreign languages do you know?  I know two.  

Your estimate is so bad that not only are your sentence structures bad but you are inattentive to the point of wanton ignorance.  The fact that you only seem able to fling poo suggests you have low emotional intelligence in addition to your low general intelligence AKA IQ.  Do you really think coming here saying the things you do is an effective usage of your time?

In reply to by LordWillingly

Teja DownWithYogaPants Tue, 07/10/2018 - 06:05 Permalink

Well, "a lot smarter" is a typical Trumptard claim. You may believe you are smart because you have found a way (via immigration aversion) to manipulate the masses. Many of the trumptard/populist horde I know actually are smart only up to a point, they know to use their brains to improve their own position and the one of their family. In regards to the public good, they prefer to do nothing or even destroy what exists. Not smart enough to see the long term consequences of their acts. The Brexitards are the best example of this, now white with fear of what they have been doing.

In reply to by DownWithYogaPants

OverTheHedge josie0802 Tue, 07/10/2018 - 05:48 Permalink

This is Yanis Varufakis's clever idea, which was why Greece ended up where it did. Trying something like this would be a red rag to a bull, in my opinion, and the Eurobull can trample and gore quite a lot, if enraged. See the history of Europa and the bull for a full appraisal. (Europe is so named because it is the area over which Zeus flew whilst raping Europa - nice guy, and either he was going very fast, or he has some serious staying power.)

In reply to by josie0802

Singelguy Tue, 07/10/2018 - 05:52 Permalink

“Also, as non-payable tax assets (of which many examples already exist), they would not be recorded in the budget until used for tax rebates — that is, two years after issuance when output and fiscal revenue have recovered.”

Recovered from what?? Does the author actually believe that more debt, however it is called, over the next 2 years is going to solve Italy’s economic problems? The problem is not a lack of money. The problem is an over regulated, bureaucratic government that is corrupt to the core. The only way to restore a semblance of normality to the economy is to reduce the size of government, eliminate 70% of regulations, deport the migrants, and tell Brussels to go to hell. 

kwaremont Tue, 07/10/2018 - 07:17 Permalink

hahaha, top globalist criminal establishment proposes perhaps some bilderbergian creation that should be first tested on poor south europeans (how about LOSERO?)... and then gradually, rob everyone of everything by introducing these "special" pseudocurrencies everywhere

ConnectingTheDots Tue, 07/10/2018 - 09:13 Permalink

Any country that gives over its right to issue its own sovereign currency to a private central bank or some political entity is very foolish indeed.

Italy, Greece, and most of Europe made that very serious mistake.

Until they can break the stranglehold that the eurozone has over them, they will never be free. It sounds to me like this parallel currency is a small baby step in the right direction. Perhaps creating hundreds of even smaller local currencies will add to the momentum.

For those whose minds are immersed in Rothchild banking doctrine and are fidgeting and getting ready to downvote, I would suggest researching local currencies success stories.


NoBillsOfCredit ConnectingTheDots Tue, 07/10/2018 - 09:43 Permalink

It would be much better if people thought from a different perspective. How are fictions (governments) "sovereign"? How is it not a fraud to issue debt based IOU nothings as "currency"? God, He who is all, is sovereign and He alone. He delegated some authority to us the People. We in turn delegated SOME of our authority to the governments preserving our rights that come from our Creator. The courts have created this idea of our representative Republic being "sovereign" but that idea goes against the whole idea of the People having the right to "throw off such government" (see Declaration of Independence) when it becomes oppressive. People need to change their understanding of words that are used to enslave them.  Assumptions of meanings without true understand of the historical context is what keeps getting us into trouble.  Like all these people who do not know that the "Antifa" are communists but that fact is hidden because their name claims what they are against but not what they are for. Or people who do not know what "currency" actually is. FRNs are not currency as they are no longer financial "notes" as they were in the past. Go look at the face of a 1934 series FRN. It is not the same as the current ones and they are not "dollars" as that term is used in the Constitution or ANY statute of the United States or any State of the Union.


In reply to by ConnectingTheDots

NoBillsOfCredit Tue, 07/10/2018 - 09:19 Permalink

Why do all of the "economic" and "fiscal" "experts" always say a debt problem is solved with more debt? Because they are Banksters! Go cryptos! Even gold and silver coin would be better than all this criminal fraudulent debt "money".