Italy Abandons the Euro. First Country to Go Fully on Virtual Currency

Mr. Matteo Salvini (left) and Mr. Luigi Di Maio (right) leaders, respectively, of the Italian Northern League and of the 5-star movement. The two Italian political groups which gained the most votes in the recent elections have recently formed a coalition government which is enacting sweeping reforms of the Italian financial system. 

The recently formed Italian coalition government, an alliance of the Northern League and the 5-Star Movement, enacted a sweeping series of measures sure to raise the attention of the world. 

First and foremost, the Italian government declared Italy to be officially out of the Eurozone. With immediate validity, the Euro ceases to be an accepted currency in Italy. Private citizens and businesses using it or accepting it are liable of criminal charges. 

Secondly, the government created a new, fully virtual, currency. This new currency does not exist in the form of cash, but only as virtual accounts. This aspect makes it similar to the well known "bitcoin" but, unlike the bitcoin, it can be issued by the government only.

The new currency is termed "E-coin," where the "E" stands for espresso. From now on, the government will pay its debt, as well as the salaries of government employees, and all its expenses in the form of espresso coins. Each e-coin is fully redeemable in an espresso coffee issued by any of the government authorized exchange points, formerly called "bars", now renamed "E-banks" (espresso banks). Coffee brewing by private citizens (cryptocoffee) has been declared illegal. The government has intimated citizens to surrender all their coffee-making equipment, including the well known "Neapolitan Flip" model.

Overnight, the bank accounts of all private citizens, companies, and institutions in Italy have been turned from the Euro denomination to the E-coin denomination, at a 1:1 exchange ratio. Some concern is recorded among citizens since by law the new e-coins can only be redeemed if the espresso coffee is immediately consumed on the spot. This is believed to pose some problems in case of large E-coin sums, especially for people suffering from tachycardia or other hearth problems. 

The government has reacted to this concern by a second form of virtual currency which is going to be launched in the coming days under the name of "P-coin" (pizza coin), an idea that seems to have been derived from some earlier experimentation. One P-coin is fully redeemable in a pizza margherita or napolitana, to be consumed on the spot. By government decree, all restaurants in Italy are by now termed "P-banks" (pizza banks).

The Italian government has also declared to be working on a third type of coin, termed the "F-coin". It has not been specified what the "F" stands for and what kind of goods or services this new coin will be redeemable in. Government spokespersons did not confirm some ongoing speculations.

At the international level, the move of the new Italian government has raised much interest and some concern. In terms of positive reactions, the president of the United States, Donald Trump, has praised the Italian initiative and declared that he is personally interested in the "F-coin."  Mr Trump has also declared that his government is working on the concept of a "P-coin," where "P" does not stand for "pizza." 

On the contrary, some European leaders have expressed concern that the diffusion od coffee or pizza based currencies may lead to a "Mediterraneanization" of Europe. Ms. Angela Merkel, prime minister of Germany, has declared that her government is working on the concept of "B-coin", redemable in a pint of beer, whereas the French government is reported to work on the "Fr-Coin", redeemable in a frog, raw or fried. Ms. Theresa May, leader of the UK government, has also declared that the country may move on a F-coin, although the term is reported to be temporarily standing for "foo" while a suitably redeemable Brexit-compatible food or beverage is being actively searched for.





 

The Limits to Growth and Greece: systemic or financial collapse?

The results of the "standard run" (or "base case") scenario of "The Limits to Growth" 1972 study. Could it be that the ongoing Greek collapse is a symptom of the more general collapse that the model generates for the first two decades of the 21st century?

So, we have arrived to an interesting point, to be intended in the Chinese sense of a curse. It is the point where the people of Greece are being asked to choose between starvation and slavery and this is supposed to be a triumph of democracy.

As the tragedy unfolds, people take sides, aiming their impotent rage at this or that target; the Euro, the bureaucrats of Brussels, the Greek government, Mr. Tsipras, some international conspiracy, and even Mr. Putin, the usual bugaboo of everything.

But, could it be that all the financial circus that we are seeing dancing in and around Greece be just the effect of much deeper causes? The effect of something that gnaws at the very foundations not only of Greece, but of the whole Western World?

Let's take a step back, and take a look at the 1972 study titled "The Limits to Growth" (LTG). Look at the "base case" scenario, the one which used as input the data that seemed to be the most reliable at the time. Here it is, in the 2004 version of the study, with updated data in input.

Despite all the criticism that the LTG study received over the years, its basic soundness was repeatedly demonstrated, for instance in "The Limits to Growth Revisited." The LTG calculations were based on a number of assumptions, the main one was that the increasing costs resulting from the gradual depletion of the world's natural resources would bring an increasing burden on the industrial system, forcing it to slow down its growth and, eventually, to start an irreversible decline.

In general, models are most reliable when they are very general (or "aggregated"). So, for instance, it is an accepted challenge that of predicting the Earth's climate in a hundred years from now, but only because the models make no attempt to predict the weather patterns of specific days and specific places. When you are hit by a hurricane, you can say that it is the result of the changing climate, but you also know that it is impossible to predict when and where the next hurricane will strike.

The same is true for the collapse generated by the LTG models. It is very aggregated: it can predict a general collapse, but it cannot predict where and when exactly local collapses will occur. But it is likely that local collapses would start in the weakest economies of the world; regions with low industrial production capabilities and little or no mineral resources of their own. Greece, indeed.

That doesn't mean that financial factors may not have accelerated the Greek collapse or made it worse. But, if the reason of the Greek disaster is systemic, then no financial trick will cure a disease which is not financial at its core.

If the LTG study is right and the crisis is generated by the gradually increasing costs of production of natural resources, (and there is plenty of evidence that these costs are increasing worldwide, see also here) then, collapse cannot be avoided, at best it can be mitigated by acting at the system level. By means of such measures as renewable energy, efficiency, and recycling, the system can be helped to cope with a reduced resource availability. But the economic contraction of the system is unavoidable. It is a contraction that we call financial collapse, but that is simply the result of the system adapting to lower quality (i.e. more expensive) resources.

And, if the reasons for the collapse are systemic and not financial, then it must be a progressing phenomenon that is going to affect all the vulnerable countries, starting with the Mediterranean European countries: Spain, Italy, and Portugal, which might well be the next in line.  

Is the collapse going to stop, ever? Yes, it will stop when the size of the world's economy will have become compatible with the quality of the energy supporting it (that we can measure in terms of the energy return on energy invested, EROEI). So, we may face a very long and deep descent, indeed, unless we manage to resupply the economy with new sources of renewable energy of comparable energy quality.

It is not impossible, but not cheap either, and most people say that it is too expensive. So, our future will be what our greed will cause it to be. At least, we'll have what we deserve.

Seven shocking events of 2014

The killing of the female bear known as Daniza, in Italy, has been the paradigmatic event of a disastrous year of senseless violence against humans and non-humans alike (image above by Helga Marsala).

Being involved with peak oil studies should make one somewhat prepared for the future. Indeed, for years, we have been claiming that the arrival of peak oil would bring turmoil and big changes in the world and we are seeing them, this year. However, the way in which these changes manifest themselves turns out to be shocking and unexpected. This 2014 has been an especially shocking year; so many things have happened. Let me list my personal shocks in no particular order


1. The collapse of oil prices. Price oscillations were expected to occur near the oil production peak, but I expected a repetition of the events of 2008, when the price crash was preceded by a financial crash. But in 2014 the price collapse came out of the blue, all by itself. Likely, a major financial crisis is in the making, but that we will see that next year.

2. The ungreening of Europe. My trip to Brussels for a hearing of the European parliament was a shocking experience for me. The Europe I knew was peaceful and dedicated to sustainability and harmonic development. What I found was that the European Parliament had become a den of warmongers hell bent on fighting Russia and on drilling for oil and gas in Europe. Not my Europe any more. Whose Europe is this?

3. The year propaganda came of age. I take this expression from Ilargi on "The Automatic Earth". Propaganda is actually much older than 2014, but surely in this year it became much more shrill and invasive than it had usually been. It is shocking to see how fast and how easily propaganda plunged us into a new cold war against Russia. Also shocking it was to see how propaganda could convince so many people (including European MPs) that drilling more and "fracking" was the solution for all our problems.

4. The Ukraine disaster. It was a shock to see how easily it was for a European country to plunge from relative normalcy into a civil war of militias fighting each other and where citizens were routinely shelled and forced to take refuge in basements. It shows how really fragile are those entities we call "states". For whom is the Ukraine bell tolling?

5. The economic collapse of Italy. What is most shocking, even frightening, is how it is taking place in absolute quiet and silence. It is like a slow motion nightmare. The government seems to be unable to act in any other way than inventing ever more creative ways to raise taxes to squeeze out as much as possible from already exhausted and impoverished citizens. People seem to be unable to react, even to understand what is going on - at most they engage in a little blame game, faulting politicians, immigrants, communists, gypsies, the Euro, and the great world conspiracy for everything that is befalling on them. A similar situation exists in other Southern European countries. How long the quiet can last is all to be seen.

6. The loss of hope of stopping climate change. 2014 was the year in which the publication of the IPCC 5th assessment report was completed. It left absolutely no ripple in the debate. People seem to think that the best weapon we have against climate change is to declare that it doesn't exist. They repeat over and over the comforting mantra that "temperatures have not increased during the past 15 years", and that despite 2014 turning out to be the hottest year on record.

7. The killing of a bear, in Italy, was a small manifestation of wanton cruelty in a year that has seen much worse. But it was a paradigmatic event that shows how difficult - even impossible - for humans to live in peace with what surrounds them - be it human or beast.


And this is just a partial list of the many shocking things of this year (maybe we can discuss that more in the comments). Then, what shocks will we see in 2015?