Hello,

I trust everyone is enjoying the summer. It is going to get a little toasty this week but I will take it over the rain any day. Speaking of toasty, this week I want to share my observations about the time we spent in Italy where the temperature was close to 40 degrees. We hit all the usual touristy spots and really enjoyed most of them. I also spent a fair bit of time talking to many of the locals who shared some good insights into the state of the general economy. Again, given that we were there in peak tourist season and spent time in the big cities of Rome and Florence, everything appeared to be bustling.

to my experience in Greece, I noticed that receipts were promptly issued for all transactions. Venders were knowledgeable about the new tax rules and were not at all happy with the changes. Surprisingly, there weren’t a lot of cash exchange outlets. In terms of cost of goods, I found everything to be very expensive when compared to North America. Outside of Florence, I came across a few larger grocery stores where the locals shopped. One, called “Pam Superstore” was quite similar to “Superstore” that we have in Canada. As I fueled up my rental car, I did a quick calculation and determined that gas was about 50% more expensive than what we pay here. I can understand why there were so many scooters driving around. A local fellow told me that the translation for Vespa (popular scooter) was Wasp. I thought this very fitting as when driving my car all the scooters were like wasps swarming around me.

We drove out to Tuscany for a bike tour which was fantastic. My family are not avid bikers and requested an easy, yet scenic, ride. Our guide started us at the top of a valley and after a 12 mile gradual descent, we found a van at the bottom waiting to pick us up. It was truly amazing and the scenery was absolutely breathtaking. The tour guide was from my native country of Scotland and we quickly bonded. He was an ex-squash champion and was originally hired to coach the Italian squash team. Later he branched out into doing bike tours. We had many stops along the route and this provided me with ample opportunity to chat with him about life in Italy. He said that his wife is a teacher, working in Florence, and earns an income of 15,000 Euros per year. Their combined income was under 30,000 Euros per year (about $44,000 Canadian) and he said that this was average for Italy. Despite their average incomes, he said it was expensive to live there and thus hard to make ends meet. He mentioned that he has been offered a salary of $150,000 USD to teach squash in America but his wife is an immovable object (his words) and would not leave Florence

In our travels, we stopped at an authentic Italian Gelato store and were given a tour by the owner. It was quite a big operation as he supplied much of the gelato for the surrounding area. I heard the word “owner” and was off to the races with all of my questions (eliciting a big sigh from my wife). He was more than happy to share all the financials from his business operation and also talked about the real estate he owned. Very quickly, it was clear to me that running a business in Italy is extremely difficult. The owner had run his Gelato company for many years and worked 14 hours a day to earn less money each year. This did not make sense at all until he showed me how much it cost to have employees (which are almost impossible to fire once hired) and what was involved in keeping them. He owned the building which was divided into a retail gelato store and a gelato production facility. The machines that made the gelato cost him hundreds of thousands of Euros and once purchased he was forced to keep them producing constantly in order to pay for them. It turns out that his business was most profitable when it was half the size and with half the number of employees. He also said that even though he has the best gelato in the area, the locals are very fickle and would not support him if he raised his prices.

Other stops included lovely wineries and many charming small towns. I found it fascinating to learn about the long standing history of all of these places.

Overall, I would say that similar to Greece, the Italians seem to be having a tough time given low incomes and a high cost of living. Very few people wanted to talk politics and seemed frustrated with the government. All that said, I really enjoyed our trip to Italy. I must say, Tuscany was the big highlight for me, and I can’t wait to head back.

Gelato tips:

Real pistachio gelato should be brown not green. If it is green they have added coloring.

Don’t buy from a store that has huge piles as it is not fresh.

Good gelato should hold its shape for some time and should not melt quickly.

Interesting tidbits:

Humans have created 8.5 billion metric tons (9.4 tons) of plastic in the past 65 years. Of all the plastic we have thrown out, only 9% has been recycled and 12% incinerated.

India is rolling out solar-powered train coaches. The country’s massive diesel-guzzling rail network rolled out its first set of cars with rooftop panels that keep lights, fans, and information displays going. A single train can save 21,000 litres (about 5,550 gallons) every year.

Toyota will take on Tesla with a fast-charging, long-range electric car. Japanese newspaper, Chunichi Shimbun, reported the vehicle – expected by 2022 – will recharge in a few minutes, thanks to a new kind of solid-state battery instead of the standard lithium-ion variety.

Eurozone heads into the second half with solid growth thrust

Eurozone economic growth gathered steam in the second quarter, as gross domestic product expanded 0.6% in the three months to June compared to the previous quarter, accelerating from a 0.5% growth rate recorded in the first quarter. The annual growth rate clocked in at 2.1%, up from a 1.9% rate in the first quarter and the fastest pace since the first quarter of 2011. The resilience of the euro area has defied pundits’ expectations heading into the year that growth was likely to slow due to political uncertainty, but the latest set of economic data lends credence to the view that the recovery in the region is deepening and becoming self-sustaining, which in turn could further fuel speculation the European Central Bank could consider removing some monetary stimulus before the end of the year. Nevertheless, the lack of inflationary pressures in the Eurozone suggests the central bank is likely to exercise a great degree of caution towards adjusting its easing measures.

Debt ceiling and China dominate U.S. political headlines

In a sign that the White House is growing increasingly frustrated with China’s inaction on North Korea’s hostile behaviors, several media outlets have reported the administration could toughen its stance on trade-related matters to penalize Beijing. The Wall Street Journal reports the U.S. administration is planning to initiate a broad investigation into China’s trade rules, including plans to compel Beijing to step up efforts to protect intellectual property rights. Meanwhile, the U.S. Congress failed to make progress on lifting the debt ceiling after talks between the White House and the Senate on Tuesday ended without “a clear sense of what the lawmakers need to deliver votes to raise the limit,” according to the Washington Post.

Bank of England stands pat on monetary policy amid an uncertain outlook

The Bank of England voted to keep its benchmark interest rate unchanged at 0.25% and the size of the quantitative-easing program at £425 billion this morning, an outcome that was largely in line with expectations. Against the backdrop of Brexit uncertainty, the central bank cut its growth forecast for the U.K. to 1.7% in 2017 from a previous estimate of 1.9%, while the forecast for 2018 was calibrated lower to 1.6% from 1.7%. Adding to the gloomy outlook, the BoE now expects real wages will sag 0.5% this year due to a combination of higher inflation and subdued wage gains, despite unemployment at the lowest since the 1970s.