European National Treasures on the Chopping Block?

Like a household selling its personal belongings to pay its debt, some eurozone countries are leasing their historic sites to pay their debts.

I have been writing about the European debt crisis. Besides the unemployment rates being at elevated levels in the eurozone, many southern eurozone countries have such high debt levels that they are literally running out of money.

To pay down some of the debt and to prevent from defaulting on their debts, Greece is thinking of selling its islands.

While Greece hopes to hold on to its national treasures and what made the country what it is today, another southern eurozone country is going the leasing route.

In the eurozone country of Italy, the government of Sardinia is initiating a program to create 30-year leases to interested investors who would like to restore and create exclusive hotels and resorts with the country’s historic lighthouses (source: The Telegraph, May 23, 2012).

There are 15 such picturesque lighthouses nestled in coves overlooking some of Sardinia’s major tourist areas and some of the most beautiful ocean and beaches in the world.

The government does not have the money to restore these sites, and since they are only accessible by boat, they have been left abandoned; the problems of the eurozone taking precedence.

However, one Italian businessman finally convinced the government of Sardinia to lease one lighthouse to him. The businessman pays the government rent, which helps the government pay its debts to the eurozone.

Not only did the businessman restore one lighthouse, but he also converted it into a hotel where tourists feel like they have their own little island resort during their stay.

Since the government needs more money to appease the eurozone, they have thrown open the doors to any foreign investor; the European debt crisis demands more austerity.

This might actually be better for the government and for people in general. Keeping empty lighthouses doesn’t help anyone, while restored ones pay rent and there is further money generated from tourists visiting them and staying on the islands.

The only fear I have is that this talk of Greek islands and now Italy’s lighthouses doesn’t lead to eventual sales. The European debt crisis will hopefully not escalate to the point of countries in the eurozone having to sell their identity to bondholders. That would be a crying shame.

Of course, before they get to that point, one can see these eurozone countries exiting the eurozone instead of conceding to such demands.

Where the Market Stands; Where it’s Headed:

It’s a totally ridiculous situation…

This morning, the yield on the 10-year U.S. Treasury hit a low of 1.77%. As the situation in Europe continues to deteriorate, as investors see growth in China coming down fast, investors are flocking to the “safety” of U.S. Treasuries. This is where it gets confusing.

The U.S. is a stone’s throw away from its own recession. So why would investors flock to U.S. Treasuries for safety? It’s a very simple answer. The U.S. central bank is the only one in the world that openly said, “If the economy gets worse, we will expand the money supply again.” That’s not an exact quote from the Federal Reserve, but rather my ballpark understanding of what they are saying. Obviously, other investors see it the same way, because they are buying 10-year U.S. Treasuries below the inflation rate!

In the eurozone, Germany will not let the European Central Bank (ECB) print money. Hence, the run on European banks and the blatantly difficult eurozone economies.

In the wake of the 10-year U.S. Treasury hitting a new low today, something different is happening. Gold is up $28.00 an ounce as I write. Usually, as the yield on the Treasuries falls, gold falls in price. Maybe investors are catching up to the fact that the only way to pay back these Treasuries is with even more inflationary money printing. (Also see: Paying the U.S. Government to Hold Your Money.)

What He Said:

“As investors, we need to take a serious look at our investment portfolios and ask, ‘How will my investments be affected by an American-grown recession?’ You should take what precautionary steps you can right now to protect yourself from a recession in 2007. Maybe you need to cut your own spending or maybe you need to sell some stocks that will take a beating during a recession. You know what tidying up you need to do. Don’t procrastinate…get to it now. And please remember: Recessions can happen quickly, stock markets don’t go up during recessions, and the longer the boom before the recession, the longer the recession. Just based on my last point, we have plenty to worry about in 2007.” Michael Lombardi in PROFIT CONFIDENTIAL, November 13, 2006. Michael was one of the first to predict a U.S. recession, long before Wall Street analysts and economists even thought it a possibility.