June 19, 2014 | In: Financial

Italy’s Economy Is on the Brink of Collapse

Yesterday I was watching a documentary on Napoli (feels weird when I call it Naples), and how life is becoming increasingly hard there, and how unemployment is skyrocketing and how people are closing their shops because of the high taxes.

15 years ago, I used to play a game called Caesar III, in that game, you were allowed to control the lives of the citizens of a Roman village. For example, you were able to increase taxes if you needed money, and when I did that, people used to leave the village, and thus I ended up with less money (instead of more).

What’s happening in Napoli, and in Italy in general, is even worse. The government wants to collect more taxes, so they suffocate businesses with taxes, and so these businesses lay off their employees, and so these employees will start collecting unemployment benefits. Which means that not only the government has less people that are not paying taxes, there are more people that are spending those taxes. Definitely not a good sign.

This issue is creating an avalanche that will soon sweep through the country and throughout Europe in general. I’m not sure how long Italy will be able to hide the fact that not everything is well over there. By the way, Italy’s GDP is 10 times the size of Greece, so imagine the impact Italy will have on the financial markets once the bluff is called.

I think it’s time for a little correction though – the Dow industrial average is now trading near a record (the record was touched last week by the way, but it seems there’s a huge resistance at 17,000).

I think we only have to wait, somebody must be buying a lot of FAZ at the moment, waiting for the opportune moment.

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