Italian Bank Shots, Economic Rankings and Megacities

Recently, in the midst of all the news of people trying to separate themselves from each other, whether in the recent UK election, current shenanigans in the United States, violent attacks in Turkey, Saudi Arabia and elsewhere, we were reminded that the world is more connected than ever before. A cinematographer in Tehran liked the Facebook page of a short film we made a few years ago with our friend, Michael Williams, called Please Hold. It’s a short (only 7 minutes) dark comedy about customer service. So even as the world is seemingly yelling collectively, “Get off my lawn,” it’s good to remember that we are all–including Iranians–united in our frustration with technical support. But even being caught up in such idealism, we are not distracted from warning bank shots in Italy, changes in countries’ economic status and locating the world’s megacities. It’s this week’s International Need to Know, driving far better than a Tesla down the international road of knowledge and information.

Without further ado, here’s what you need to know.

Italy’s Bank Shot

Early this year we noted the high rate of nonperforming loans in Italy. In the large turbulent wake of Brexit, as everyone waits for the next British made footwear to drop, markets and pundits are paying more attention to Italy’s challenges. In the chart below, we see that the non-performing loan rate in Italy is up to 17% (only surpassed by Greece, which at this point we should probably rename “Yikes”*). Italy is the third-largest economy in Europe, but it has not seen GDP growth rates above 2% since the 1980s. Italy is also a great illustration of the world’s aging demographics which we’ve referred to in this space. The median age in Italy is 45. Over a fifth of Italians are now senior citizens which is a higher percentage than in that mecca of retirees, Florida. You could turn Italy into a Disneyworld theme park for the movie, Cocoon. Earlier this week, Italy’s regulators banned short selling on Italy’s third-largest bank, Banca Monte dei Paschi Siena, whose stock has fallen, oh, uh, well, 99% from its 2007 highs. The EU Commission, which in the past was hardline on Italy and its banks, is now allowing the Italian government to use guarantees of up to $150 billion for short term liquidity support. Brexit, as we suspected last week, is forcing the EU to change. But regardless of what the UK does, the EU has deep ongoing structural challenges that have to be addressed to deal with its deep ongoing economic challenges. The problems in Italy are not new. New pressure to do something about them is. The race is on.

      

*As in: “If you go to Yikes, you should really check out the Parthenon.”

Moving on Up (and Down)

Every July, the World Bank revises its classification of world’s economies based on estimates of gross national income (GNI) per capita.  The categories for countries are low income; lower middle income; upper middle-income and high income. This year a number of countries moved into higher categories with Cambodia going from Low to Lower Middle, and Georgia from Lower Middle to Upper Middle. But two countries, like English Premiere Football clubs relegated to a lower division, fell from High Income status to Upper Middle:  Russia and Venezuela. We look forward to Putin and Maduro taking the walk of shame.

 
  

 

Meet Me in the City

As you’ve probably read, the world is urbanizing at a rapid rate. Everyone it seems wants to live in big cities, even as it turns out, Kevin Durant.  We wonder if 100 years hence, should our planet still be spinning reliably on its axis, whether great swathes of the world’s countrysides will return to their previous natural state as humanity huddles in tiny pods (save the lucky few in their penthouses and stray mansions) in huge megacities. While we wait to find out, we note that most of the current megacities in the world are located in Asia. In the UN graph below, Tokyo is listed at number one, followed by Delhi and Shanghai. America barely makes the top ten, with New York (where we’re headed in a few weeks) coming in at number 9. Africa is urbanizing faster than anywhere else in the world and if that trend continues, will soon dominate the top 20. That may, or may not, be good for elephants, rhinos and other endangered animals.

          

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