Italy looks to be next.

Protests this morning in Italy are cause for investor alarm. It also is cause for man on the street in the US alarm. Italy is a large economy measuring in the trillion dollar range unlike Greece which is in the low hundred billions dollar size. Everyone knows Greece is over leveraged and it's economy is due for free fall since they have and continue to live beyond their means. All this due to the social programs that have been piled on and on by Greek politicians wanting to get votes.  Oh yes they have taxes, high taxes over 50%, but the national game in Greece is tax avoidance. So default as I mentioned earlier is not if but when.

 

Italy has similar problems, but is a few years behind Greece in living beyond their means. However Italy is catching up and in their case the problem is that the debt load there is huge, as in trillions of dollars huge.  Citizens there are already responding to the much smaller cuts in social programs and the protests in the streets this morning are something to cause alarm. The president of Italy is starting to get the lack of confidence thinking that just got voting on in Greece.  Haircuts on bonds, bank failures, and the thought of default in Italy makes me consider putting my money between the mattresses. 

 

Consider that if Italy starts down the path of Greece the banks in Europe who hold much of this sovereign debt are going down. Consider if Italy takes a haircut or defaults on anything the smallish stake the US has in Greek banks looks like a joke compared to our stake in Italy and European banks. Yes I said OUR, as in the US banks via a little thing called the International Monetary Fund.  The IMF is the lender of last resort here for non-US banks via the US taxpayer whose taxes fund this operation. So if Italy goes down you lose some serious money yourself. The US taxpayers will asked to refund the IMF to keep it stable.  If you are wondering just who signed you up for this look no further than past and current Congresses and US Presidents.

 

Now if you think you are worried consider Mr. Obama. I expect his sleep problems over Greece, are now becoming sleepless nights over Italy. His reelection, if Italy goes down, is doomed as well as his party.

 

Let's add in that France this morning announces it's first round of "austerity measures" and you got even more headaches over the horizon.

 

So the beat goes on in Europe. Years of living over your means, years of social programs too big to fund are coming home to roost. if this sounds familiar it is since the US is headed down this same path. No amount of taxes can save them or us from this disaster despite what Mr. Obama says, if you do not believe that take a look at Europe.  The world needs some leaders and there are none to be found.

 

If you have investments frankly nowhere is safe from this collapse if it happens. US Treasuries will take yet another dip as investors pile in and values go down for current holders. Truth here is if Europe becomes a domino event you can expect some of those "haircuts" coming to US Treaury holders too. As I said the mattress is starting to look interesting.  Anybody checked for bedbugs lately?