Ancient Rome Versus Modern Rome

The year was 211BC and ancient Rome introduced the denarius as its money. The coins were nearly pure silver and the coins had a theoretical weight of about 4.5 grams. 

The standard, although not usually met in practice, remained fairly stable throughout the Republic, with the notable exception of times of war. The large number of coins required to raise an army and pay for supplies often necessitated the debasement of the coinage. An example of this is the denarii that were struck by Mark Antony to pay his army during his battles against Octavian. These coins, slightly smaller in diameter than a normal denarius, were made of noticeably debased silver. 

The denarius continued to decline slowly in purity, with a notable reduction instituted by Septimius Severus. By the year 274, the denarius contained virtually no silver. 

On today’s show we’re taking a closer look at the latest collapse of the Italian Government and what it might mean in the future. 

Now I know what you’re thinking, I’m investing in real estate in the heartland of America. What does the resignation of an Italian Prime Minister have to do with my life?

Italy has had 61 governments since WW-II, more than any other nation on earth. Part of the problem is that Italy’s electoral system is based on proportional representation. That means that if there are a large number of parties, which there are, it’s virtually impossible for a single party to get enough votes to form a majority government. They almost always end up being a coalition government between parties with differing ideologies. 

Italy is the 8th largest economy in the world and they rely heavily on exports for their economic sustenance. 

Now Italy has had numerous failed governments in the past. Their electoral system appears a bit dysfunctional. 

Prime Minister Giuseppe Conte resigned on Tuesday after Matteo Salvini, leader of the League Party withdrew support for the government. 

Now none of this matters to real estate investors in North America. This is nothing more than a power struggle. But the issue runs a bit deeper, and here’s why we care. Italy is part of the European Union, one of 28 countries, soon to be 27 after the Great Britain exits later this year. 

The European Union is like a family where each member of the family has their own personality and values. Oh, and like a lot of families, they fight about money. Italy has never really recovered from the 2008 financial crisis. When I was there a few weeks ago, the news media were still talking about the financial crisis like it was something new. But we’re 11 years later. It’s no longer a crisis. It’s the new normal and the Italian people have not yet woken up to the fact that they need to adapt. 

Italy is trying every trick in the book to try and jump start their economy. They haven’t realized yet that some of their policies are in fact responsible for the anemic economic growth. It’s easier to print money. But wait, that’s in contravention of EU rules. 

You probably remember a couple of years ago when all the financial markets were spooked over the possibility of Greece defaulting on their national debt. Greece is one of the smaller members of the EU. They only have 12M people. They’re a rounding error on the side of Europe. 

I’ve been saying for some time that the next financial crisis is going to be a sovereign debt crisis. I still stand by that. I just can’t tell you which country is going to be the trigger. Will it be Greece, Turkey, Italy, Argentina, or the good ol US of A. 

The headwaters of the next financial crisis are wrapped up in governments that believe spending their way to prosperity is the path to economic growth.