Word: cambiali
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Final Roost. The cambiali look like ordinary U.S. bank checks-but the resemblance ends there. In Italy's consumer boom, the buyer of a refrigerator or bedroom set signs a promissory note for each monthly installment. He thus may sign as many as 48 cambiali for one TV set or refrigerator. The merchant who sells him the goods uses the cambiali to pay his own bills, just as if they were currency, and his supplier or landlord in turn uses them to pay off his debts. The notes may pass through 20 or more hands before they finally roost...
What bothers the Italian financial community is that so many of the cambiali end up in the collector's hands...
...signing the cambiali with abandon to finance everything from furs to apartments, thousands upon thousands of Italians have run up staggering debts. Nearly every day the Italian press discovers another case of someone obli gated to pay out more monthly on cambiali than he actually earns. Almost everyone does his part, but the heaviest plungers are the poverty-stricken Sicilians and the migrants to the rich north, who are dazzled by luxury goods and modern household appliances. Last year 8,160,546 cambiali were dishonored, 10% more than...
Shot Down. Italy's financial men consider cambiali a strong inflationary force, believe that they have helped to bring Italy to the verge of serious economic crisis. Cambiali have already pushed up Italian wages and living costs and have sparked a consumer buying spree that has led many Italian businessmen to forget about exports in order to sell more at home. The result is that Italy's trade deficit has nearly doubled, from $748 million for the first seven months last year to $1.3 billion for the same period this year...
Interim Premier Giovanni Leone's recent attempt to curb credit was shot down by the right, left and center, since no party is willing to incur the wrath of legions of cambiali signers. But unless Italy soon brings its credit binge under control, its economic miracle could, like a butterfly, just flutter away...