Down goes yet another government.
This time, the victim was Italy and its prime minister, Matteo Renzi. In a vote last Sunday, Italians overwhelmingly rejected a Renzi-backed plan to reform the country’s constitution. In rejecting the referendum, Italians were also rejecting Renzi, who had pledged to resign from office if the referendum failed.
In April, Li Lu and Bruce Greenwald took part in a discussion at the 13th Annual Columbia China Business Conference. The value investor and professor discussed multiple topics, including the value investing philosophy and the qualities Li looks for when evaluating potential investments. Q3 2021 hedge fund letters, conferences and more How Value Investing Has Read More
So, he bid farewell on Monday.
His defeat was a victory for a political party known as the Five Star Movement — a group of populists that has become Italy’s largest opposition party and which, therefore, looks likely to claim the prime minister’s post.
This won’t mean much to most Americans. And global stock markets certainly sighed with hearty indifference on Monday morning.
But that doesn’t negate the importance of Italy’s vote. It’s another sign of the global rebellion I wrote about in the December issue of Total Wealth Insider.
Despite the disinterest, what ultimately comes of this vote will be quite painful for all of us and our wealth…
The markets are simply wrong. Of that I am 100% confident.
That won’t be so obvious in the immediate future. Wall Street, in particular, is too high on post-election dopamine and the belief that the Fed will finally raise interest rates again — proof too many believe that our still-limp economy is robust. The degree of wrongness will, however, become much more obvious over the next 12 months.
Brexit, Trump and Italy share a common denominator: a rejection of global superelites and the political and economic levers they control in capitals all over the Western world.
Across America and the European Union, the institutions of government are under assault by a movement best defined as chaos. It is not, however, chaos in its most negative form — aimless in its rampage and hell-bent on destruction at any cost. It’s chaos taking the form of thoughtful recalibration. Chaos in pursuit of meaningful change.
It’s angry and disruptive, but it has a point to make, and that point isn’t all bad: The parasitic class of superelites has bastardized capitalism to extract value for themselves at the cost of everyone else, and either governments change the rules by which this game is rigged … or we the people will change governments.
And since governments are beholden to the hands that feed them — the parasitic superelites — we the people are coming to the realization that we are called to duty as agents of change.
Italy won’t be the last example of this revolt.
My bet is that Marine Le Pen — a French Trump, only with mascara — wins the presidency in France next spring.
In the Netherlands, the populist Party for Freedom is now the biggest political power in Dutch polls, meaning its extreme-right leader Geert Wilders will likely be prime minister.
The European Revolution
Ultimately, what we’re seeing is the disintegration of the European Union happening in real time.
The media don’t see it that way, nor do politicians (at least not outwardly). They talk about the legal and constitutional processes and procedures necessary for Brexit or Italeave or Frexit or Netherexit — or any other exit — to succeed in pulling a country out of the European Union. They confidently point to that as though the security of processes and procedures actually matters to anyone other than politicians and bureaucrats. It’s laughable, at best.
Deaf, dumb and blind — and dangerously out of touch — at worst.
The American Revolution wasn’t the legal path for aggrieved Brits to break free of the king’s shackles. Nor was the French Revolution. Nor the Cuban Revolution or the Bolshevik Revolution or the Iranian Revolution. No social movement of significance in history followed the rules of their contemporary elites. They broke the rules in demanding change, which is, by definition, precisely what a revolution is about.
Why would this time be any different?
If the courts in England or Italy, or in the sclerotic halls of the European Union, rule that Britain or Italy cannot lawfully disengage from the Union, despite what the majority of local people desire … well, does anyone honestly think the majority of local people are just gonna scuff their feet in the dirt and say, “Dang! Well, we gave it the college try.”?
People who feel put upon and dismissed by the system always rebel against the system at some point. They will have their freedom.
Which is my way of predicting that Brexit and the Italian referendum are the first blows of a wrecking ball slamming against the ramparts of Fortress Europe.
French and Dutch voters opting for ultraright populists in a few months will announce the breach in the wall that sees Europe devolve back into individual fiefdoms.
And that will be an economic disaster for the world, including U.S. markets…
Protect Against the Chaos
The end of the European Union means the death of the euro and the return of individual currencies … which means that the world’s largest consumer bloc (some 600 million buyers) will no longer exist.
Multinationals all over the world will feel the impact of that, as will companies all across Europe.
Most of the rest will plunge … which means consumers across much of Europe will not be able to afford products produced in Europe’s leading economies … which means companies across those leading economies will see sales tumble markedly … meaning recession — or worse — in those economies … which means a sharp slowdown for companies in the U.S., China and Japan.
So, basically, the economies that drive the world will be slowing/potentially crashing.
This is what revolutions do — they upset the status quo to usher in a new order.
And the only asset that will survive?
Yep. You know the answer … gold.
Buy it now. It’s cheap relative to where it’s going as the masses take up arms against the elites.
Grab whatever physical gold you like (never paper gold; that stuff faces a crisis).
Personally, I’ve been buying raw gold coins that were used in 19th and 20th century trade. But you could just as easily buy bullion.
Either way, gold is your only insurance policy against what the Italian vote portends.
Until next time, good trading…