You’ve probably seen the math by now….There is just no way Italy is going to grow their way out of what some are (incorrectly) calling a debt crisis.  And the other peripheral countries are in similar positions.  These two headlines from Reuters pretty much sum up the situation in Italy:

“Italy to raise 2012 debt/GDP target to 123.4pct from 119.5pct, hikes 2013 to 121.6pct from 116.1 pct

Italy CUTS 2012 GDP forecast to -1.2pct from -0.4pct, raises 2013 to +0.5pct from +0.3pct”

And we should expect that 2013 forecast to get slashed when they try to balance the budget and growth continues to sink just like we’ve seen in Greece.

So the story has become simple.  As long as the ECB is willing to write the check then they can hold the line.  The big risk now are civil unrest leading to political upheaval and potential defections/defaults.   How long can these countries impose depression on their citizens before they finally realize that this currency system is simply not working?   The core must either move more quickly towards unification and a true resolution of the currency crisis or risk increasing turmoil and eventual combustion….


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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  1. Apparently it is nothing to worry about. Just printing more money to pay back the debts will have no negative consequences, so we all might just as well print away. DOW to 25,000, but a Big Mac is gonna cost you $50 soon. I’m lovin’ it!!
    What a charade:(


    elsewhere in the world (leave you to guess where)…..


  3. You now what I find hilarius?

    The global uproar over the one week the U.S. “held the global economy and its financial markets hostage” over our debt ceiling negotiations last year.

    The world loathed us for that one week of alleged captivity given the damage it was allegedly doing to the rest of the world.

    And yet, here we are, almost three years into the obvious part of the long death sprial that the Euro project represents and it’s as if nobody anywhere gives a crap.

    Where is all the righteous indignation over Europe’s inability to get its house in order?

    Just another example of the U.S. being held to a double and unfair standard. But, in the end, I guess that’s why we’re the U.S….

    People expect us to have our $hit together; Europe’s expected to be a second rate player…

  4. “People expect us to have our $hit together; Europe’s expected to be a second rate player…”

    How Europe sees our football(soccer) play we view their economy.

    @ Gary_UK.
    The Redcoat fighting style still lives in you. Just because you take the austerity(austrians) standing up in a line and get shot dead doesn’t win any battles. The point is to survive and win.
    I don’t see a fiat crisis. My dollars are just fine today as they were in 2008 when I heard this fiat crisis devaluation would cause soup lines in the U.S. The only lines I see are outside of the Apple store buying ipads with U.S dollars. Another great american company benefiting from the U.S govt. policies.

  5. @VII
    You are mixing up Apples with Apple computers ,Speaking as a earthling , I can’t eat silicon

  6. Gary_UK:
    I agree with your points.
    My heart tells me we are the U.S. of A, with our own currency, while The EU has to play by the laws of economics.
    My head tells me that the law of economics trumps any phony currency issuer ability.
    Don Levit

  7. @ The Dork of Cork-

    “I can’t eat silicon” If you come to Los Angeles that’s all you’ll be eating. :-)

  8. @ Don

    When your the EU and your faced with what they are faced with there are no laws. You change them, you LTRO them, you put in power unelected representitives, you change treaties, and or somehow that which is owed just gets whited out.

    When you control the lawmakers you can find your way out of any crisis. They said when it get’s to Spain it’s over. I disagree..when it gets to Spain..the laws of economics dictate..you change the laws and make the debt go away.

    They have no choice

  9. Hello again VII.

    It’s just a matter of natural law isn’t it. The US dollar prices by the only real wealth reserve (gold) has lost an awful lot of its value since 2008.

    It is mathematically impossible for the world to service its debts right now (infinite compound interest just never ends well does it?), and there is only one way out of the current mess. That inevitable end result is a grand reset of living standards the world over, where those who make real stuff and generate wealth will (surprise, surprise) get wealthier (think Brazil, Korea, China), whilst those that try to borrow their lifestyle (think US, UK, Japan, a fair chunk of Europe) will become unweathly!

    Just one result, inevitable.

    The only choice for countries (and/or central banks) is whether to confront that reality now, via austerity (reality), or to postpone it by a few short years by devaluing the currency via endless paper-buying QE.

    You take the high road, we’ll take the low, but we’ll end up in the same destination!

    Inevitable, and in your poverty-filled old age, you will look back with regret on your inability to see the obvious for what it always was. (Me, I’ll be sat on a Caribbean beach in front of my villa, thankful I bought a load of real money, shiny and solid).

    Best wishes to all fiatbugs.

  10. Currency collapse? The trade weighted dollar is flat over the last 5 years and inflation is running under 3% per year. That’s anything but a currency collapse….

  11. “How long can these countries impose depression on their citizens”

    What do you mean by ‘depression’? That the GIPSIFs finally cannot anymore consume far above their means as they please, may it cost their own children and grandchildren, and of course the taxpayers of other countries, what it wants?

  12. Hi Gary_UK

    Your so mean to me….you just laid out my whole life. And it doesn’t look good. “poverty-filled old age” Thats not nice..Gary.

    Well..I dont’ disagree with anything your saying. But you just have to ask yourself this. If you can figure out how bad it could be than don’t you think it’s probably much worse than you could ever imagine. And if it’s much worse don’t you think since this isn’t the dark ages that it will never happen. Simply because when the debts are that bad…they just go away.

    More..I’ve been to several Tech conferences and I must say the future looks amazing. It looks so bright the Caribbean Beach is not where you’ll want to be. You’ll want to be in San Diego, S.F, North Carolina, Boston, Irvine and many other wonderful places with young entrepreneaurs making sure the doomsdayers just keep moving their target. The world is beautiful and the future looks amazing. I see it everyday…it’s too bad I can’t get you to see how wonderful the future is.
    Me..I don’t know where I’ll be Gary. But I’ll keep building on what I have no matter who thinks it’s a waste of time.

  13. >> “I can’t eat silicon” If you come to Los Angeles that’s all you’ll be eating. :-)”

    VII, damn, just power washed my laptop with the Vodka and Orange I was slurping on.

  14. Nah. They will do LTRO 3, 4, 5, 6, and 7 this year. All EU State Sovereign debt will be re-nationalized in each State’s own banks. Then Z Germans will tell Spain to take a hike. A long walk on a short pier kind of hike. They will tell Ireland to drown themselves in Guiness, and the Italians to bail themselves out by exporting Fiats and Chryslers. The first State to dump the Euro will probably be Germany, and American depositors in German banks will probably get a pile of new Reichsmarks in exchange for their Euros.

  15. I disagree with your rather fatalistic take. In effect this comes dopwn to servicing debt and with sufficient bailouts and or restructuring you can always move to a position of servicing debt IF you control the issuance of the currency.
    Now will they do that and on what terms is actually what this argument is all about.
    Think underwater US houseowners having been given an whole array of policy crutches to keep them afloat and I believe the latest if I am correct is actually principle writedown which is no different than Euordebt holders exchanging bonds for one’s with a lower coupon ,or additional maturity term in the sense that the negotiated outcome is meant to keep both parties in the game.
    The fact is the GFC was so damned big it was always going to be about debt forgiveness and how to form it in a way that was ‘politically’ acceptable.
    That is still the name of the game in Europe.

  16. But hyperinflation is right around the corner Cullen! No matter that it hasnt come for decades, its still on its way!

  17. Italy does not grow kids for years and has never happened.
    Cheat for a reason, relax! Zero bubble, primary surpluses, low debt and high private savings rate and of course the “Made in Italy” strong exports … please relax!