Food and wine as collateral for bank loans

Italian banks may soon accept high-end prosciutto and wine as collateral for loans. The Italian agriculture minister is into the idea. Apparently, it's not as far-fetched as it sounds. From The Guardian:
The Italian bank Credito Emiliano has long stored hundreds of thousands of parmesan wheels, worth about 300 (euros) each, in warehouses as collateral while they age. Since the bank can sell the cheese if creditors default, it can afford to offer low interest rates to an industry which is suffering from recession and supermarket discounting. Legs of cured ham, or prosciutto crudo, weighing about 10kg, can sell for hundreds of euros after months of curing in controlled conditions, while bottles of Brunello di Montalcino are regularly snapped up for the same amount. "We may start off with accepting wine as collateral, but I would prefer the Italian banking association to launch an industry-wide scheme which involves a range of products," said Zonin. "This will help producers in times of crisis as well as when the economy picks up."
"Italian banks may take ham and wine as collateral" (Thanks, Carlo Longino!)

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  1. That doesn’t surprise me at all about the Italians. They clearly prize choice food more highly than money itself, and fistfights can break out over low-quality eats.

  2. Reminds me of a joke about a millionaire who took out a $100 loan from the bank, giving a rolls royce as collateral. When confronted they say the interrest is cheaper than a parking garage.

  3. Until I saw that they actually take the collateral and stick it in a warehouse (unlike the collateral on a house or car loan) I was worried that they hadn’t thought this through. If I’m about to default on a loan anyway, you bet I’m drinking that wine.

  4. Creativity helps when you have no money. In this case, the Italian government – which is nearly bankrupt – tries to help the economy by encouraging the bankers to do something out of the ordinary.
    The rich countries, on the other side (especially USA) are pouring billions of dollars into their economies, effectively nationalizing it.
    Go capitalism!

  5. I smell a bubble forming. Lending against these goods will cause a rise in the value of these goods (because now in addition to the utility of consumption they have the utility of financing, so demand rises and scarcity follows). This will in turn give banks more comfort to lend higher amounts (at eventually lower rates) against the same goods, and snowball continues down the hill… until one day one banker wakes up and decides it’s all gotten out of hand, and the lemming behavior follows in the other direction. See tulips and housing for prior examples.

  6. I don’t see any problem with this at all. Like #6Ernunnos, I am encouraged that at least the Italians have decided to back up their currency with assets that have a tangible value. And unlike the United States’ mythical fiat money, something that actually appreciates in value with the passage of time.

    You could say it is almost like a return to the kind of barter economy Italy employed before the invention of modern banking in the 12th centry with the establishment of the Chamber of Loans by the Maritime Republic of Venice to help finance its military campaigns. The Medici dynasty refined the business of banking 200 years later to fertilize the emergence of the Renaissance, but their bank eventually collapsed from the greed and corruption of the Vatican, which they eventually purchashed, er, controlled.

  7. Tangible value is one thing, but the banks seem to think that’s the same as tangy value.

    Ouch. nevermind. Unpost, unpost!

  8. Wine, art, classic cars… Anything that increases in value as a function of aging is a viable investment and it really shouldn’t come as much of a surprise that it can be used as loan security.

  9. At least it’s based on something real and of worth. All I get are these little slips of green paper [or electronic bits] that supposedly represent some vague idea of… something?

  10. It will make a fine Simpson’s episode: Homer, while visiting Italy, falls into the vault and eats a billion Euros-worth of food.

  11. *Ahem*, I did mention this story a few days ago in the “Suggest a link” feature. Well it was a NYT story, but still.

    Karma, people.

  12. Rob: What exactly is real about a 35,000 Euro bottle of vine? And trust me, if I get half of what they plan to do, then 35,000 Euro is going to be a bargain price.

  13. I don’t see a problem with using anything of value as collateral, as long as the thing in question can be sold at a value equal to the value it originally had when it was submitted as collateral. I mean they do it with real estate and other assets, why not things like cheese and wine.

    But man, I’ve been a homebrewer for a long time, and I’m loving the idea that wine could be used as collateral. I’m sure that the value of the bottle has a lot to do with the brand, the vineyard where the grapes are grown, etc… but what if I could make a bottle of homemade wine that could actually be presented as collateral. Maybe its just wishful thinking. Anyway, I don’t agree with #9. Any lending system will be subject to this type of rise and fall of supply, demand, value, etc… The real problem is a lack of common sense, and overpowering greed that cloud’s the lender’s judgment. Each lender should just pay more attention to if the collateral will continue to have the value it originally had, use good common sense and good quality advisers.

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