The Coup

There is no doubt that any Italian who cares about his/her country will be more than happy to see Berlusconi toppled from the government, it is quite clear to anyone with a minimum of common sense that this government is simply there to rob the state and that needed reforms are not being done neither planned. The country is in deep recession, the debt is rising to dangerous levels, the social cohesion is being torn apart, degeneration and decline are everywhere and there is no future at the horizon.

There is a systemic risk of collapse of the country and should it happen the shockwaves will be felt all over the world.

Leaving aside the rhetoric on Nero/Berlusconi singing while Rome is burning, Berlusconi is increasingly becoming a threat not only to Italy but to the entire Euro area and consequently to the global economy. His inaction and corruption are turning an already catastrophic situation into total Armageddon.

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Italians are unable and/or unwilling to get rid of him so a new way to get rid of this psychopath had to be devised.

How can you remove a Prime Minister of a Western country who has a 70% approval rating that control all the Italian media and that has placed his cronies in all the key positions of the government. In a third world country you organize a coup but in Italy? The only way is external pressure and turn his cronies against him. Until his servants will find an economic and political advantage to consort with Berlusconi he is safe, but if the external pressure on the media depicts him as weak and unstable his cronies might think that is time to jump ship before it is too late, and nowhere more than Italy the art of jumping ship has reached such sophisticated levels. Few defections from the ranks have started to appear and more will follow shortly. The situation though is complicated in Italy by the lack of a serious contender to Berlusconi, decades of lack of meritocracy in the country have impeded to create real leaders and have brought to the political scenes only petty criminals and servants with an huge appetite for ransacking and plunder but lacking the intelligence and the capacity to be players in the great global game.

On one thing Berlusconi is right, there is definitely a plot against him and for sure it is a very elaborated one.

The Times of London last week published an article where reliable and anonymous sources inside the Italian government where declaring that an exit strategy from Berlusconi was being seriously contemplated.

Nothing specific but sufficient to raise in the readers the idea that the boat is starting to sink or rather sufficient to send a message to the cronies of the PDL that is time to switch side and repudiate the Prime Minister if they want to survive. The message has not gone un-listened in Italy and we have seen one of Berlusconi’s top servants Giuliano Ferrara to be critical with an article on “ Il Foglio” newspaper. Quite astonishing that Ferrara a notorious servant of Berlusconi can have the audacity to go against his master publicly, a clear sign that Berlusconi is day after day looking like an unstable psychopath who has lost control and touch with the reality. His latest denial of the economic crisis and a public call to muzzle the press trumpeting the latest GDP figures sounds more and more the cry of a seriously stressed and scared man, weakened and unable to face the reality that is overwhelming him.

This week both Times and Independent have come back with new articles where they are asserting that Berlusconi is going to be ousted from power and replaced from Draghi the actual governor of the Bank of Italy.

Draghi is a very interesting character in this story, regardless of his low profile is a very important actor in the global game.

He is one of the few Italians belonging to the Bilderberg Group that some conspirational fanatics see behind the New World Order design. He is a low profile, professional that avoid any quarrel and seem an oasis of tranquility in a turbulent country.

Giulio Tremonti the financial minister hates him and his attacks to Draghi are a constant leitmotiv of any financial discussion.

Draghi has rarely even answered back to Tremonti’s attacks, maybe because its nature is non confrontational a rare virtue in a quarreling country or maybe simply to show that he is above petty quarrels and that he does not even deign himself to answer back to the poor low cast Tremonti.

Anyway whatever the reason Draghi is clearly one of the few influential persons in Italy, esteemed internationally and with a astonishing curriculum and maybe for this reason despised by many politicians like Tremonti.

One would think now that this change would be great for the country, remove a psychopathic degenerated  Nero-Berlusconi for a talented, smart professional and humble Draghi.

Maybe, but what if all this plot against Berlusconi was in first place to open the road for Draghi to become the leader.

Berlusconi has created a dangerous void of democracy in the country destroying any possible alternative to his rule and destroying the rule of law with his legislation that has silenced the judicial system has removed the last vestiges of balance and check powers in the Italian laws and allowed him to do whatever he wanted.

With this extraordinary powers in his hand whoever will replace Berlusconi will have unchecked powers not sanctioned by a popular vote and it is doubtful that he will be eager to relinquish them with an electoral and legislative reform.

Berlusconi is a disgrace to Italy certainly but whoever will follow must be closely monitored. We want to be careful to sing victory when Berlusconi will be gone since the alternative could be even scarier than him.

The rise of Corporatism !

The latest news on corporate merging are seeing on Sunday June 21st Xstrata, an Anglo-Swiss mining giant, proposing a “merger of equals” with Anglo American, a big London-based miner. The combined firm, worth some $70 billion, would become the world’s third-largest mining company.
After FIAT missed merging with Opel we are seeing a restructuring of the corporate world never seen before. Until 2007 such giant mergers would have been prevented from occurring due to anti-trust laws put in place exactly to avoid that a giant corporation can control a entire sector of the economy and potentially pose a systemic threat should it fall.
Anti trust laws are officially still there but it appears that everyone has forgot about them, there are no inquiries, no contrary voices, not even a doubt on the possible consequences of such consolidations.
The paradox of this story though is not Europe but USA.
USA was the inventor of anti-trust laws to prevent the abuses and dangers of the robber barons era when Rockfellers, Astors and company were de facto controlling the economy and consequently the country.
Anti-trust laws have always been at the forefront of the political discussion whenever a big merging was taking place, today is exactly the contrary, US government is not only taking equities in the corporations but dictating merging and acquisitions justified by the current economic crisis.
Chrysler forced to join FIAT, Bank of America forced to buy Merrill Lynch, these diktats unthinkable few years ago are common practice in the new economic scenario.
Of course, governments will tell us that all is for the greater good of the national economy, that is something they had to do, that they had no choice otherwise we would be now fighting for food scraps in the streets. I love when they use the apocalypse card!!
So now we have few key corporations in key sectors, equally leveraged or controlled by the governments, not competing against each other but many times joining forces to regulate the sector and control the flow of cash, and either controlled or having as stock holder the government.
First those companies controlled by the government have an unfair advantage against free companies, regardless of the good intentions and fair speeches, the government cannot afford to lose more money in unsuccessful business so if necessary will do its best to make revenue either tricking competition out or taking it out with a merger. First victim of the lack of competition and merit is the Free Market which is agonizing in USA.
The merging of corporations and state let us not forget is called Fascism. Benito Mussolini believed that fascism should have really been called corporatism, because corporatism is when government and business are intertwined.
Too much power is being concentrated in too few hands, we have been here before and it did not go well.
We created laws and rules to prevent this concentration of power from happening again and it is scary how few months of economic decline can let us all repudiate our principles and ideals.
The road to hell is paved with good intentions and we are definitely walking on it now.

Chronicles from a bitterly troubled feudal state

A very poignant article from the New York Times on Berlusconi and Italy is bringing to the light the many bizarre and worrisome anomalies of the Italian society.
I have copied below the full article which is very intelligently pointing out the malaise of a servile mindset sweeping the Italian society and threatening its democracy.

In Italy, Questions Are From Enemies, and That’s That

By RACHEL DONADIO Published: June 6, 2009

ROME — I got a call last week from an Italian friend, an investigative reporter. He had just spoken to an Italian magistrate who wanted to sound out a theory.

The magistrate wondered — in all seriousness — if my recent article in The New York Times about Prime Minister Silvio Berlusconi’s personal life could be evidence that Mayor Michael R. Bloomberg, envious of Mr. Berlusconi’s media empire, was using me to take down the prime minister.

My friend quickly and rightly dismissed the theory for what it was: insane. But the fact that it had been advanced by a respectable magistrate tells you almost everything you need to know about how power operates in Italy. It also goes a long way toward explaining the unstoppable success of Mr. Berlusconi, a phenomenon as alien to Americans as conflict-of-interest laws are to Italians.

Americans are forever asking how Italy can keep voting for Mr. Berlusconi, whose legal problems — not to mention his wife’s recent threats of divorce and accusations about her husband’s dalliances with very young women — would have toppled governments elsewhere.

But Italians don’t always see things this way. In Italy, abuse of office is something of a foreign concept, even though an Italian court is now investigating whether Mr. Berlusconi committed it when he used government planes to shuttle guests, including a Neapolitan singer and a flamenco dancer, to gala parties at his villa in Sardinia.

Mr. Berlusconi has brushed this off, as he has all other claims of impropriety, as a campaign against him by left-wing magistrates and journalists. He says they want to discredit his center-right coalition ahead of this weekend’s elections for the European Parliament, which he is still expected to win.

While wildly off target in my case, the magistrate’s Bloomberg theory is not entirely crazy. Mr. Berlusconi last week suggested in an interview that The Times of London had published critical editorials about him because it is owned by Rupert Murdoch, whose Sky is the largest player in the Italian cable television market after Mr. Berlusconi.

In Italy, this is seen as business as usual. The general understanding is that everyone uses the means at his disposal to fight his rivals.

The real issue here is that Italy is not a meritocracy. It is a highly evolved feudal society in which everyone is seen as — and inevitably is — the product of a system, or a patron.

During the postwar years, the American-backed Christian Democrats, Moscow-backed Communists and business-minded Socialists had their own networks of politicians, bankers, lawyers — and their own press organs. That corrupt patronage system collapsed with the end of the cold war and a huge bribery scandal.

Today, there is no ideology and no network; there is only Mr. Berlusconi, and you are either with him or against him. Compared to the old order, Mr. Berlusconi’s political class is seen as a modernizing force. Mr. Berlusconi’s rivals accuse him of being on the wrong side of the law, and he in turn accuses them of being on the wrong side of history. Those two things shouldn’t cancel each other out, but often do.

The members of the Italian left have been infighting since the collapse of the Berlin Wall and are so weak and ineffective today that some in this land of byzantine conspiracy theories believe that Mr. Berlusconi must be paying them off.

Italy is deeply confusing for Americans, who are steeped in notions of speaking truth to power and following the money, raised in the country of “Yes we can,” not “Sorry, Signora, that’s impossible.”

In the topsy-turvy logic of Italy, Mr. Berlusconi’s unrivalled grip on the public and private sectors and media outlets doesn’t make him seem compromised. Instead, his supporters see him as rich enough to be independent. As one working-class Roman told me not long ago, full of admiration, “he’s so rich, he didn’t even need to go into politics.”

In Italy, when journalists ask completely legitimate questions about the legal status and personal life of the leader of a Group of Eight country — or even when they ask why Italy doesn’t seem to care about the answers — they are inevitably accused of insulting the prime minister or of being the pawns of larger interests.

In Italy, the general assumption is that someone is guilty until proven innocent. Trials — in the press and in the courts — are more often about defending personal honor than establishing facts, which are easily manipulated.

Sometimes I wonder what Pope Benedict XVI, who has railed against the “dictatorship of relativism,” in which equating all beliefs leads to nihilism, would make of Italy. Here, information is used less to clarify than to obfuscate.

How else to interpret the barrage of wildly contradictory material that has emerged in the press in recent weeks about how Mr. Berlusconi met Noemi Letizia, whose 18th birthday party he attended in April — an act that so angered his long-estranged wife that in threatening divorce she became de facto opposition leader?

In the absence of a clear, coherent story, the only standard of evidence becomes personal loyalty.

Ms. Letizia said in an interview last week that she was upset that her new boyfriend had auditioned for the reality television show “Big Brother” without asking her permission.

In the reality show that is today’s Italy, Mr. Berlusconi is the clear winner. His rivals are doing little more than throwing tomatoes on stage. The actor is showing signs of fatigue, but the audience is glued to its seats. Après lui, le déluge.

Peak Capital

To understand how the world's economic system works It would be useful to read a forgotten report. The 1972 report of the Club of Rome known as "The Limits to Growth" (LTG).

The LTG study was based on a rather complex model which, however, can be summarized in terms of five main elements. The five elements are 1) population, 2) mineral resources, 3) agricultural resources, 4) pollution and 5) capital investments. This is just one of the many ways to build such a model. Other choices are possible, but the LTG model, improved over the years, is a good way to capture the essential elements of the world's economy. Despite the persistent legend that the LTG study was "wrong"; the results of the study have been found to be remarkably accurate

None of the five elements of the model is a problem in itself. But each one can become a problem. In that case, we speak of 1) overpopulation, 2) mineral depletion, 3) famine, 4) ecosystem collapse and 5) economic decline. Often, these five problems are considered as if they were independent from each other. People tend to attribute all what is going on to a single problem: peak oil, climate change, overpopulation, and so on. In particular, economists tend to see the economy as independent from the availability of natural resources. Of course, this cannot be true and in a "dynamic" model, such as the LTG one, all the elements of the economic system interact with each other; either reinforcing each other (positive feedback) or weakening each other (negative feedback).
In the LTG world model, "capital" is created by investments generated by industrial activity. Capital is assumed to decay at a rate proportional to the amount of existing capital. This is called obsolescence or, sometimes, depreciation. To keep capital growing, or at least not disappearing, investments need to be larger than, or as large as, depreciation. Since investments depend on the availability of natural resources, the buildup (or the dissipation) of the capital stock depend on the progressive depletion of these resources. In the original LTG model of 1972, there were three kinds of capital stocks considered: industrial capital (factories, machines, etc.), service capital (schools, bridges, hospitals, etc.) and agricultural capital (farms, land, machinery, etc.). In the latest version (2004), industrial capital and mining capital are considered separately, as you see in the following figure ( from the synopsis of the 30 year update of LTG). Note how the "capital" parameter (in its various forms) affects the parameters which determine the GDP.

Here are the results of these interactions, expressed in graphical form as what is called the "standard run" or "base case model" of the LTG study (from the 2004 edition)

In the graph, you don't see the "capital" parameter plotted. However, industrial capital follows the same curve of industrial production. The other forms of capital have a similar behavior. All reach a maximum level and then decline, carrying the whole economy down with them. Overall, it is "peak capital."

When do we expect peak capital to occur? According to the "standard run" of the LTG report, it may arrive during the first two decades of the century. It may very well be that much of what we are seeing now is a symptom of peak capital approaching: airports, roads, bridges, dikes, dams, and about everything that goes under the name of "infrastructure" are decaying everywhere in the world. The whole economic system is becoming unable to maintain the level of complexity that it had reached just a few decades ago.