Economists working for investment banks and financial institutions very often have a master or PhD in economics, so they speak the same language I speak, even if they do not do academic research.
And they understand when the person they meet does not have an econ background.
And they understand when the person they meet does not have an econ background.
It is a matter of language, type of reasoning, use of empirical evidence to ground your arguments.
Mr. @borghi_claudio -chief economic advisor to @matteosalvinimi is almost immediately recognised as a non economist. They can do that by simply translating his "funny" tweets.
Mr. @borghi_claudio -chief economic advisor to @matteosalvinimi is almost immediately recognised as a non economist. They can do that by simply translating his "funny" tweets.
In cheap talk games there are "babbling" equilibria where the sender can send any message because the receiver does not listen, or does not act upon those random messages.
People in the investment banking business tell me that this started to happen with Mr. @borghi_claudio.
People in the investment banking business tell me that this started to happen with Mr. @borghi_claudio.
But. There is a big but.
He is still the chair of the budget committee in Italian lower house and chief economic advisor to @matteosalvinimi (is he?)
Hard facts typically matter more than cheap talk to rational investors, who will have a close look to the incoming budget law.
He is still the chair of the budget committee in Italian lower house and chief economic advisor to @matteosalvinimi (is he?)
Hard facts typically matter more than cheap talk to rational investors, who will have a close look to the incoming budget law.
So, the big issue is whether the crazy ideas of Mr. Borghi on limitless monetary financing of deficits for a sovreign country, the possibility for @ecb to eliminate the spread for the bonds of any country belonging to the Union would influence the budget.
How? Two possible routes.
1) Push for large deficit spending, with no consideration for the Medium Term Objective of a structurally balanced budget, in the false hope that this would lead to higher growth and a lower debt/gdp ratio.
1) Push for large deficit spending, with no consideration for the Medium Term Objective of a structurally balanced budget, in the false hope that this would lead to higher growth and a lower debt/gdp ratio.
2) Push for a large deficit spending to create an "accident" (the accident theory by @Phastidio) with EU institutions in order to pave the way for ltalian eurexit, by giving the blame to EU institutions themselves.
This is a very dangerous situation.
This is a very dangerous situation.
The Italian government should make it clear that Mr. @borghi_claudio does not represent its views. A more radical solution is that @matteosalvinimi himself makes it clear that Borghi is no longer his chief economic advisor.
In economic decisions the identity of people matters.
In economic decisions the identity of people matters.
Why? Because in the lack of a well-functioning commitment technology elected or appointed people do what they like in first place, and cannot be credibly constrained to do something different.
The built-in increase in the spread of Italian bonds depends on new expectations:
The built-in increase in the spread of Italian bonds depends on new expectations:
rational investors give a non null probability to unsustainable deficit spending and/or the search for a "pro-eurexit accident" because of the ideas of @luigidimaio and @matteosalvinimi on economic matters. In turn those ideas are influenced by their advisors.
Salvini should make it EXPLICITLY clear that he trusts @MEF_GOV minister Tria, undersecretary Giorgetti and @massimogara more than his anti-euro advisors such as @borghi_claudio.
Unless he wants the next elections to be a referendum on eurexit.
Thanks for your attention!
Unless he wants the next elections to be a referendum on eurexit.
Thanks for your attention!
