The Cage: Borghi vs Boldrin April 13, 2014

On La7 aired "La Gabbia", the transmission of Gianluigi Paragone where the arguments of the supporters of the euro have often been compared with those of the supporters of the exit from the euro.

In this article we will analyze the statements by Claudio Borghi and Michele Boldrin , aired on April 13, 2014 visible on the La7 YouTube channel (in the title it says 2013 but it is a typo).

Net of political bickering, we try to verify – with data in hand – what they said right and wrong.


BOLDRINYou can get out of the euro if you want to hurt yourself … go ahead. Why don't you have to?

Look, the euro is like health: you realize how useful it is when you lose it.

We are all used to traveling and using the currency in our pocket, going abroad, without the risk of exchange.

Companies make contracts, you buy electricity, materials, components. You don't have to go crazy and ask yourself " what will the exchange of the national currency be in three months? "

These are costs, this is bad living. So the first thing we will lose is this, which has become a daily thing, which we are all used to. Too bad it's worth a lot of money.

Not only! It goes as it goes " euro = health " [APPLAUSE]

Then there is another thing: if I'm not mistaken here [referring to Paragone] you like this, there are bad bankers , the work that Borghi did, in short, once if I don't remember correctly, then they manipulate …

Well you know, if we take – I don't know what – the " Borghino " as a new national currency, or the " Salvino ", instead of the euro.

Then it's a weak little currency, they also want to devalue it: the Visco will have to think about it or – I don't know what they do – Borghi, governor of the central bank (or Bagnai).

But later we are … the object of the attacks, of the conspiracies of international finance MUCH MORE THAN NOW !

Because no matter how bad it takes, the Germans also have the euro, even the French who are ugly, bad and big. They also think a bit about not being fooled, instead we are alone, they eat us.

So the other good idea is that " no euro = bad finance eats you "

The elimination of exchange costs and traveling without changing money are the obvious consequences of having joined the single currency.

But this only applies to the eurozone countries, as the euro fluctuates with other European and world currencies , where we travel, where we buy electricity, materials and so on.

And so you have to take those 30 seconds to write, for example, "euro-dollar exchange rate" on google and go crazy.

Many companies then relocated to where the euro is not present, not only within the European Union (see Poland, Romania), but also out of kind in Turkey or Albania, if not even in China …

So not the euro has certainly not eliminated the "problems" listed by Boldrin but only a partial reduction limited to the countries that have joined the single currency.

The devaluation terrorism, in the case of a return to the "bourgeois", is a classic argument of those who have lost all the devaluations of the euro on the street – made by Trichet and Draghi – after the 2008 crisis.

For example, in 2014 the euro had depreciated by 10% against the US dollar , by 23% against the Swiss franc , by 20% against the yuan .

The values ​​refer to the percentage change (annual average) taking as reference the 2008 value .

And in 2015 there was a further devaluation on all 6 currencies considered. Did you notice anything?

In the face of an elimination of exchange costs for the countries of the euro area, heralded as an advantage, what does it mean to have the same currency as France and Germany, that is our main competitors ?

That their industries compete fiercely with ours! In the graph below, an increase in the index marks a loss of competitiveness.

SOURCE: Bank of Italy – Italian economy in brief (April 2020)

In fact, we have lost a lot of respect to France and Germany, without however being able to recover competitiveness by adjusting the exchange rate of our national currency

The euro fluctuates with other currencies in the world, so French and German competition is not only in the single market but all over the world , a great deal isn't it?

This factor also contributed to the failure of many companies. From the 2012 Bank of Italy report, on page 114, we read:

« According to Cerved Group data, in 2012 over 12,000 companies filed for bankruptcy , 9.3 percent more than the 2009-2011 average.

Between 2009 and 2012 the incidence of bankruptcies was higher in the manufacturing industry, particularly in the traditional sectors, and in construction .

The liquidations of the capital companies also increased, in 2012 almost 43,000, 14 percent more than the 2009-2011 average »

Next point. Will we be speculating much more with the national currency than now? Have you ever heard of spreads before 2011?

Yet it was much higher in the 90s, but only since 2011 has it become a problem …

Among the major advanced nations without the euro, how many had suffered speculative attacks in 2011-12? Obviously none

Returning to Italy, the only times that with our lira we have been objects of speculation was 1976 and 1992 when the Bank of Italy opted for unnecessary – in hindsight – exchange defense interventions

Now it's up to Borghi


VILLAGESTrying not to be eaten by bad finance and trying to feel good, instead I say something a little trivial that we are looking at now.

Namely: euro = unemployment

Euro equals unemployment not because I dream of it, mostly because we have never seen such unemployment! And there is with the euro not with the Borghino.

What's up? It happens that if our currency is too strong for our economy, too heavy, the result is that people find it very convenient to take and go to produce abroad .

And then those things happen there, if we help them then, no, go worse as well. Instead what happens?

When we had the liretta – which was the equivalent of the village – we devalued in 1992, we remember not?

So in 95, so it means 3 years after this disaster … there were these numbers here: three, two1.9

These are growths of GDP, and the growth of the country's wealth.

BOLDRIN – nominal, nominal

BORGHIAnd this [3] was Italy – non nominal – this [2] was USA and this [1,9] was Germany

Go and see how much GDP had grown in 95, three years after the horrible devaluation, with the liretta devalued and Italy had the highest growth rate of all the countries of the western world .

The numbers are here and if you deny them you make a fool!

In 2013 the unemployment rate was 12.2%, beating the previous record of 11.3% (1998).

Record again beaten in 2014 which reached 12.7% but the real drama was that of youth (15-24 years)

Already because youth unemployment , in 2013 it was 40% and was still rising up to 42.7% in 2014

Let's move on to GDP data

As regards the growth in GDP, the numbers cited by Borghi are those of the OECD , more precisely taken from the Economic outlook No. 59 of 1996 (first issue) on page 159 .

We speak therefore of real GDP (real GDP), not nominal.

The green line is Italy from 85 to 95 when the average growth was 2.1% – rates that we can dream of today – while the red box is 1995 for the G7 countries.

But Boldrin's objections are not over.

BOLDRINWell Borghi is not that you can do the economy with the year you choose. Because the things that matter is year after year

Because if a year you catch me the best year you have and then all the others you suck … on average

Let us reckon the accounts taking 1992 as the "start", this time I use the IMF data – already beautiful and ready for use – which start from 1980 to reach our days.

So let's see the real GDP trend of the G7 countries up to 1999.

In Europe only the United Kingdom was able to keep up with the USA and Canada which were impregnable for other G7 countries.

In the years of "free fluctuation" of the lira (93-96) the growth of the Italian GDP – purple line – was practically equal to the French one, after returning to the SME (end 96) France surpassed us.

At the end of the decade the Italian growth was higher than the Japanese and German ones, we were second in the "B series" of the G7.

Do you want to see how the chart continues arriving in 2019? Look here.

In 2014, the year in which the transmission was filmed, the Italian GDP had returned to the levels of 2000 , in the meantime both Germany (after 2009) and Japan (after the Monti cure ) had far exceeded us.

And so even Japan, which in the 90s and 2000s was the black hole of world growth , passed us the scepter of this negative record.

In 2019 Italy had barely recovered the 2011 level, I had already spoken about the damage caused by the euro in this article .

Note that Canada , which has barely 40 million inhabitants, grows as much as the USA (and without the need for someone else to control its currency …)

And now another great classic, always Boldrin on the attack.


BOLDRINFor some time you have told these good people that it was necessary to do as in Argentina . Have you tried to see how it goes in Argentina? (…)

VILLAGESArgentina is exactly what we are now !

BOLDRINIn Argentina I'm hungry and they have devalued as you want

VILLAGES – Did Argentina go into crisis when it had a fixed exchange rate or when did it devalue?

BOLDRIN – When he devaluedhe lost 25%

BORGHI – [laughs] But what are you saying, but do you want to make fun of yourself? Argentina equalized the weight with the dollar

BOLDRINVillages don't tell lies on television … it's bad

BORGHICome on, they are misleading you for the millionth time, there are signs on the internet of the shit you say

Argentina made a 1: 1 exchange rate parity with the US dollar , which lasted from 15 January 1992 until 8 January 2002.

SOURCE: Bank of Italy – exchange rate time series (daily fluctuations)

What had happened before, during and after the devaluation? We use the data freely made available by the International Monetary Fund .

We take the data (1990-2013) on unemployment , real GDP growth, the current account balance and the inflation rate (available from 98), therefore we summarize them in a graph.

Let's make a comparison between the 10 years of fixed exchange rate (1992-2001) and the following ten years after the devaluation (2002-2011), because the economy is not made with "the year you want", right?

In the fixed exchange period, given in annual averages, real GDP grew by 2.85 percent, the unemployment rate was at 15.37 percent and the current account balance was in deficit (-3.05% of GDP )

In the period from the devaluation onwards, on average real GDP grew by 4.72 percent, unemployment fell to 11.53 percent, current accounts returned to profit with 2.52% of GDP.

The recession began in 1999 (GDP -3.4%) and until 2001 inflation was also negative ( deflation ). What happened with the devaluation?

SOURCE: Bank of Italy – exchange rate time series (annual averages)

On average in 2002 it took 3.11 ARS for 1 $ so there was a devaluation of 211% compared to the previous year.

From a deflationary situation it passed to an inflation of 25.9% (not 211!) And then collapsed in the following two years (in 2004 it was 4.4%)

If 2002 was a year of recession (-10.9%), Argentina's real GDP has already started to grow strongly since 2003 – never below 8% until 2007 – with the consequent fall in unemployment (8.5% in 2007)

These are the main data to know about Argentina, for further details I refer to this article .

Let's go back to the debate, the word is still Boldrin's


BOLDRIN – real wages … that is, loaves, sandwiches, televisions, the holidays we can buy: they are the nominal wages .

That is … the euros (or salvini) that you put in your pocket, divided by the prices of goods.

We economists write " W " – because there is this English habit – above " P "

So what is the idea of ​​Borghi – and of those who preach tragedy -?

If we get out of the bad euro and enter the weak … "salvina" – modern version of the liretta – the " W " nominal wage stands still (or at least grows a little), the " P " which is the price level – since c is the devaluation – it grows more (like 20%)

So what happens, in a fraction, if the number above is still and the number below increases? The village falls ! And that thing there is the real wages: the sandwiches, the shirts …

So what they want to do is cut their real wages without saying it ! And they want to cut them, and not to state bureaucrats, but to people who work in the industries they export.

VILLAGES – Boldrin is right! Do you know how much is the "W" of an unemployed person ? It's zero ! [applause] Right now we are going to tell an unemployed person that the real wage w / p…

BOLDRIN : you have to see how much employment grows after you devalue, for sure what happens immediately is that you cut real wages . But tell people: "I want to cut real wages by 20%"

BORGHI : that's not true, that's what happens now: real wages are cut now

Take this ISTAT chart on household purchasing power: from 2008 to 2013 it has always collapsed (especially in 2012), like the propensity to save

SOURCE: ISTAT- Institutional accounts report (1995-2019) – page 4

There is no need for inflation to lose real purchasing power, austerity as candidly admitted by Monti is enough

« We're actually destroying domestic demand through fiscal consolidation »

The result is that chasm (-5.2%) that you have seen before.

For completeness we now apply the W / P formula with the ISTAT data on the net incomes of Italian families , which start from 2003 (therefore in full euro and after the changeover)

Once the income for 2003 was "100" (it was € 26,919), we see the annual change in the latter compared to the trend in consumer prices

So let's get the graph: the race between prices and wages, in 2014, was winning it (drum roll)

Inflation! Oh yes because what happens if inflation is zero and income decreases? The village falls!

In 2014 inflation was "winning" by about 10 points on the increase in incomes.

The loss of real purchasing power is certified by ISTAT itself, which in a recent publication commented on the 2017 data

" Despite the growth recorded in 2017, the overall contraction in income compared to 2007 , the year preceding the onset of the first symptoms of the economic crisis, is still significant, with a loss in real terms equal to 8.8% on average for the family income and 6.8% for equivalent income (which takes into account economies of scale, making the income levels of families of different sizes comparable) »

Although increased in nominal terms (income was 31,393 euros) compared to 2003, Italian households are in poorer real terms.

Do you know which category of workers have lost the most to the euro? Here is another ready-made ISTAT chart on real incomes .

Self-employed workers – such as the hooded plumber – in 2014 had lost over 30% of their purchasing power in real terms (compared to 2003), then to a small extent recovered in 2017.

In summary this was the "euro dividend" for the mob . Go on

Does devaluation bring inflation? Since 1993, inflation has been lower than in the early 1990s.

But also with the eurone , which had devalued in 2015, what happened to inflation? Nothing, the 2% target of the ECB has remained very far in the last 5 years …

Then the fact that in the last years of the lira inflation stood between 2-3% , many do not remember it, or pretend not to know.

And they give us the story that the inflation of the 80s returns, if we wait a little longer, they give you the barrel of oil with the supermarket points …

Go on


COMPARISONI wanted to throw another provocation there: what if the euro runs out because Germany leaves?

BOLDRIN – Boh! Many things are said: [ironic] that elephants fly, that homeopathy heals you (…)

Today as today, on the 2000 billion Italian public debt, on average we pay relatively low interest rates , do you know why?

Because there is the euro and there is bad Germany that guarantees! We pay things like 3% a little more, sometimes 4%.

Then that public debt is almost entirely in the hands of the Italians at 70%: that is 2 × 7 is 14, more or less 1,400-1,500 billion euros that the Italians – even my friend Paragone, also my friend Borghi – there has there (…) public debt, okay?

SOURCE: Bank of Italy – needs and debt

You know, if we get out of the euro and do the "salvino", the interest rates will become 8% -9% : those are taxes! An additional 3% interest per year is an avalanche of money !

From a correct premise, the public debt is about 70% in Italian hands (even today), he managed to say that … 3 + 3 = 8 and 4 + 3 = 9 but for iCoNpetenti mathematics is an opinion you know …

Joking aside, the idea that the decrease in interest rates is the merit of the euro is all to prove , because there has been such a collapse even in countries that do not have the euro!

Take the 10-year bonds of Italy, USA, Canada, Japan, the United Kingdom, Denmark and Sweden (the last two had rejected membership of the euro by referendum).

As you can see, even today Japan does not "pay" the interest rates it had in the 90s, which then had its debt / GDP ratio "exploded" at that time.

As you can see while we were at the mercy of the spread in 2011-12 the other countries were not affected in the least. Do you understand how countries without the euro have been eaten by bad finance?

It's up to Borghi

VILLAGESIf the problem is the public debt, which being in the hands of the Italians they take only 3-4%, if it were true that they began to take 8% and so on: maybe it would still be a gift to the Italians !

BOLDRINLook, the Italians have to pay those interests there … They are taxes, they are taxes!

VILLAGESBut this is not the case because there is something called real interest !

It means that at this moment, in addition to the normal interest rate – which is what is needed to recover the expected inflationwe are paying a risk: the default risk .

Because sovereign debt has causally become at risk! Because we have seen that Greece with the euro … its public debt has become waste paper (…)

BOLDRIN5% the other day, but what do you say? 5% waste paper? Villages don't say idiots .

BORGHIbecause there was the default, as it happens, it added to the interest rate – which normally must be paid – a risk of default.

The moment you regain monetary sovereignty, you no longer have this risk! And then you will only pay the expected inflation : ie real rate = zero

What do interest rates depend on? What does an increase in performance mean? Let's read a brief explanation of the OECD:

" Long-term interest rates refer to government bonds that expire in ten years.

Rates are mainly determined by the price charged by the lender , the risk of the borrower and the reduction in the value of the capital .

Long-term interest rates are generally averages of daily rates, measured as a percentage.

These interest rates are implied by the prices at which government bonds are traded on the financial markets , not by the interest rates at which the loans were issued.

In all cases, they refer to bonds whose capital repayment is guaranteed by governments .

Long-term interest rates are one of the determining factors of business investment .

Low long-term interest rates encourage investment in new equipment and high interest rates discourage it . Investments are, in turn, one of the main sources of economic growth. »

Let's take a look at the evolution of long-term (nominal) interest rates in relation to the inflation rate from 1960 to 2019.

According to the AMECO definition for Italy, reference is made to tenyear bonds starting from 1993. The real rate is calculated with a simple subtraction.

The correlation between inflation and securities yield is not so evident, Borghi simplifies it a bit too much.

Boldrin instead gets excited because in those days the Greek rates had fallen to 5%, but then the following year they went back to rise to 9-10% (on average). The reason? The ECB had turned off the taps in Athens!

Already because the debt becomes waste paper when there is no guarantee from the Central Bank , walls have understood this today.

The more careful will have noticed that since 2015 the American 10-year bonds have a slightly higher yield than the equivalent Italian bonds.

In the New York Times, you can imagine an eight-column title with the words “HURRY UP! SPREAD TREASURY-BUND 10Y IS 300 POINT "? It would be ridiculous!

Just in 2011, the S&P rating agency downgraded the American TdS. Former Federal Reserve Governor (American Central Bank) Alan Greenspan commented on the story, the excerpt is as follows.

To the tenant's question, if US government bonds were still a safe investment, he replied

" Very much so. This is not an issue of credit rating, the United States can pay any debt it has because we can always print money to do that . So, there is zero probability of default. »

In Italy this excerpt was broadcast on RAI on " The last word " – another program by Gianluigi Paragone – in the episode of 9 November 2012, together with another declaration by Bernanke (the governor of the time)

The full episode is on this link , the statements of the governors of the FED (Bernanke and Greenspan) are after about an hour.

Closed parentheses, in normal conditions, the TdS are reimbursed by the central bank and not by the taxpayers.


A reduced version of this debate was published on Boldrin's YouTube channel some time ago, aimed solely at discrediting Borghi

After all, "debunking" applies to enemies and is interpreted for friends, isn't it?

Curious the fact that the video is cut so as to make the tweets below, which often contained insults to Michelino (but it could be a coincidence) little visible.

Net of this, we see the "arguments" used to demonstrate that this debate won him Boldrin.

# 1 – Euro equal unemployment in Italy, but not record-breaking

The author of the video, a fan of Boldrin, says it without putting any evidence to support it

Let's take the Monetary Fund database and see the evolution of unemployment in Italy, Spain, Portugal, Greece

SOURCE: Processing on IMF data

Here are the 2013 data: Italy marks 12.2%, Spain 26.1%, Greece 27.5%, Portugal 17%.

These were the previous records , again according to the IMF: Italy 11.3% in 1998 , Spain had 24.1% in 1994 , Greece 12.1% in 1999 , Portugal 10.5% in 1984 .

Let's start well

# 2 Growth rates in the 90s

The author of the video, not having understood what data Borghi had mentioned, uses those of the per capita GDP of AMECO . And then it shows this chart "year after year" from 92 to 99.

The substance, however, does not change much from the graphs shown before: a "series A" with the United Kingdom and the USA and a "series B" with the countries that had to converge in the single currency emerge (except obviously Japan)

Ah no, here Japan is missing in the graph (it was in crisis at the time for this it grew little), on the other hand you can also see here that the tail light is Germany (light blue line at the bottom).

The implication is "on average we sucked" so Boldrin is right.

Well let's see then with the eurone only.

The objection "it is not true that on average we were the first" is there, but it is necessary to show the difference between the liretta and the euro and to make the viewer understand when it was better.

If in 1999 we were fifth out of seven (ahead of Japan and Germany) and we sucked, then in 2014 that we were the black hole of world growth what is the adjective to use?

And today we also risk leaving the G7 , for now only rumors but the possibility of this scenario exists.

# 3 – Unemployment in the 90s

When Borghi says "the purchasing power of an unemployed person is zero", the objection is as follows:

Borghi forgets to say that after the 1992 devaluation, unemployment has increased and remained at 11% for several years. After entering the euro it collapsed "

The devaluation of the lira came as an " extreme ratio ", Amato and Ciampi did everything – in the summer of 1992 – to defend the fixed exchange rate thanks to restrictive policies, but in the end they had to abandon the EMS.

Even at the time there were the phenomena that "devaluation brings inflation".

SOURCE: La Stampa – August 19, 1992 (page 21)

For example, the governor of the time Ciampi: " devaluing would have been madness if we had done it now we would have 11% inflation "

Closed parenthesis, what was to happen to unemployment after the financial crisis that in 1993 brought Italy, France and Germany into recession?

In fact there was an increase also in France and Germany , which suffered the devaluation of the lira, here you can check the data

Over the years following the signing of Maastricht, these countries had to stick to the convergence parameters of the treaty, namely sacrifices and austerities . We were the most penalized because we started from higher debt and deficit.

Let's go back to unemployment, it was said " with the entry into force of the euro collapsing ", suppose that the descent from 1999 to 2007 is, in some way, the merit of the euro, OK?

Well why with the same euro you have the unemployment surge up to 12.7% in 7 years? Going back to the unemployment that existed before and with interests?

In short, after the sacrifices in the name of Maastricht in the 90s, we find ourselves in a worse situation than that in which we started …

Yet in the video the screen with the data of the last few years appeared, so why lie knowing that you are lying?

Too easy to say that thanks to the euro, unemployment drops and then, at the first crisis that passes, explode and touch records never seen before.

Now in 2020 the figure is offset by the collapse of the employed and by the boom of inactive people , remember that inactive people are not counted in the unemployment rate.

At the end of the fair, those who did not have a lira in the 90s – the south most affected by the phenomenon – did not have a euro in the years 2010 , however any negative record of the past broke with the euro.

# 4 – It is not true that real wages are being cut today

To prove this thesis, the author puts the following chart for a few seconds.

What should be understood from this chart? Before the author had done so much to show the steps of GDP per capita and now thinks to get away with so little?

Does the viewer have to verify it? Let's do it!

In those days, the Bank of Italy report came out in 2013, which also shows real gross wages per employee unit (AWU).

Let's look at the total : in 2013 the salary was € 24,677 (at 2005 prices) which is lower than € 832 compared to 2010, making it slightly higher than the 2005 income only

Finally, given that GDP has also been included in the graph, it should be specified that that was the nominal

As mentioned before, real GDP (from 2002 to 2017 included) had grown by just a meager percentage point, that is 0.063% per year, always according to the IMF data.

# 5 – Real rates were higher with the lira

The further apart the two lines are, the higher the real rate is. We can clearly see that with the lira rates in recent years we paid very high real average rates "

Objection accepted but clarifications are needed.

First, in the early 1990s, the "risk" was not that of default but that of failing to maintain bilateral parity in the EMS narrow band , especially against the German mark.

In fact, after exiting the EMS, the fall in rates begins.

Secondly, that of the graph is the rate at issue (it is written in the title), the effective one is the one contracted on the market (higher).

# 6 – The signs on the internet

I leave this image last, where our friend is scandalized because Borghi said "signs on the internet". Do you want to show it off?

OK but do not run away from the substance of the speech: the Argentine crisis began in 1999 when the country went into deflation.

Regarding Boldrin's " 3 + 3 = 8 " instead of anything to say? Two weights two measures.

Overall, this self-styled fact-checking deserves a four and a half because the main argument of the debate, unemployment , has been clearly manipulated by the author of the video.


Liberists live in a world where unemployment data do not exist after the crisis, where gross income is spent in the economy (do you pay taxes?), Purchasing power grows even if ISTAT certifies that on the contrary, where those who work today do NOT run any danger of ending up in poverty (pictured under the " poor workers "), the stagnation of GDP has nothing to do with the euro, even though practically all the rest of the world is growing except the eurozone.

The number of absolute poor in Italy should also make us think: in 2019 there were 4.6 million slightly down compared to 2017-18 but still very high

Gli anni della lira erano il paradiso? ovviamente no. Ma negare che oggi si sta peggio di prima è intellettualmente disonesto, soprattutto per quanto riguarda l' aspettativa di futuro dei giovani , quella è venuta a mancare.

Ma in fondo – con tutta questa macelleria sociale – la cattiva inflazione è stata sconfitta per sempre, godetevi la deflazione come gli argentini nel 1999-2001.

Ma anche senza andare dall'altra parte del mondo, basta anche guardare i nostri vicini di casa: secondo i dati la Francia non sembra andare male, il PIL reale cresce abbastanza, la disoccupazione (pur altina) sfiora ma non supera i valori degli anni 90.

Già da fine 2018 i francesi erano in rivolta, evidentemente non hanno tempo di leggere i numerini….

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L'articolo La Gabbia: Borghi vs Boldrin 13 aprile 2014 proviene da .

This is a machine translation of a post published on Scenari Economici at the URL on Fri, 19 Jun 2020 15:29:49 +0000.