Speaking before students at the Collegio di Milano yesterday, former Italian Economics Minister Giulio Tremonti called for bank separation à la Glass-Steagall as part of his proposal for an "emergency exit" from the crisis. Tremonti also said that Weimar-style hyperinflation is around the corner.
Reporting on the meeting, Il Giornale quoted Tremonti as saying, "They said that to save the system you must save the banks, but they did not think that banks included speculation, and instead, governments bailed the banks out unconditionally." Conclusion: "Two years later, the banking system attacks states with money received from states." The worst is not behind us, but in front of the blind eyes of many: "Weimar is a scenario much closer than one could imagine," describing the 1923 scenario of destruction of money and political nightmares.
Tremonti showed "an impressive chart" depicting "the relationship between real activity based on production, and derivatives, so to speak bets on what will occur. It is one to twelve... at this point, [Tremonti] evokes Weimar. One among the solutions is the same one President Franklin Delano Roosevelt found, after the 1929 crisis: Separating investment banks from deposit banks. Those regulations were in place until recently. 'Clinton repealed them in the U.S.A., Draghi cancelled them in Italy in the '90s.'"
Tremonti also called for Eurobonds, but not as a European federal debt; rather, as bonds tied to concrete projects.
According to another media report, Tremonti said that Greece has received EU400 billion from the EU, which went to the banks. Had the Greeks used this for the economy, there would be a boom in Greece today.
Tremonti had a "Plan B" for Italy to exit from the euro, said economist Paolo Savona yesterday, in an interview with La7 television network. Italy must have a Plan B, he said. When he was Economy Minister, Tremonti told me he had one. I am sure that the Banca d'Italia people have one. They must have one.