Monday, June 06, 2011

The ECB - Too fat to fall?

A good and to me, very accurate report on the mess the West's economy is now in, comes from a guest writer, Andrew Butter, on the web site,, this morning. I quote below the portion on Europe's woes, to see the whole article and what the author has to say on the USA house price mess, click here.

In Europe it was different, very, very different. The first line of defense was that in case of default, it would be up to the taxpayers of the future to pay the money back (with interest).

The problem with that of course, is that (a) taxpayers of the future quite often feel a bit miffed about having to pay for the extravagance of their parents and (b) that gets even more complicated when the taxpayers who's pockets you want to put your hand in live in another country from the bank that lent their government the money.

The Germans recently came up with a clever idea whereby they could take a charge on some assets owned by the Greek Government and sell them so that their banks could get back the money they had lent (with interest). Sadly that idea didn't sell very well to the population of Greece who suggested rather rudely, that if the Germans wanted to try on the tactics employed by the Third Reich, they had better darn well try invading again.

So much for the "happy family" of the European Union, that's the problem with collateral, you need to think-through the logistics of collecting it, and when the bailiff gets confronted by an irate homeowner holding a loaded shotgun, well that can cause "complications".

Where the EU and the Euro really went wrong was that the "defense" against the potential complications of German banks having to raise an army to invade Greece in order to get some collateral they "owned", was that the EU had "Rules".

That "ought to have worked", particularly since the "system" was devised by the French; who although they swear they are anarchists at heart, love rules; and by the Germans who always follow rules. Except for one thing, Greeks, Italians, Spaniards and Irish – don't follow rules, and predictably they cheated, they cooked their books and they lied about their GDP, and about just about everything else.

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Blogger James Higham said...

The Germans have much to answer for. I'm currently in the middle of a German language critique on their policies, whilst we are contracting in ours. Frightening.

In Part 1, I suggested this as further reading:

The article:

1:50 PM  

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