The Euro Crisis, Contradictions between Countries in the Periphery and Centre of the European Union
Nicely explained article with very easy to understand overview of the mechanisms of the crisis and whose interests are being served.
The crisis that started in the United States in 2007-2008, hit the European Union head on in 2008, and has been causing major problems in the eurozone since 2010. |2| Banks from the strongest European countries are responsible for spreading this plague from the United States to Europe, because they had invested massively in structured financial products. It is important to explain why this crisis has struck the European Union and the eurozone harder than the United States.
What the author doesn’t mention head on is how corrupt these private and public key institutions and most of the gamut of European politicians are.
For a jaw-dropping, reasonably recent example that is a fine example of how deep in the muck Europeans are, read about the “legally corrupt” scheme that defrauded Portuguese taxpayers of hundreds of millions of euros:
Portuguese Train Company Was Run Over by a Snowball
This trade is magic, but its broad outline is recognizable. The customer wants to pay a lower interest rate than it’s currently paying. (Who wouldn’t?) The bank is happy to make its interest expense lower now, in exchange for making it higher later on.3 (The bank is obviously not going to make it lower now and also lower later on, that is dumb.) The customer isn’t so sure about that: Paying less now and paying more later doesn’t seem like that great a deal.
So the bank offers an even better deal: Pay less now, and maybe pay more later. Obviously, maybe paying more later is worth less than definitely paying more later, so you’ll have to pay more more later. There’s a series of dials to turn: The more money you save now, the longer you save for, and the less likely you are to pay more later, the bigger the amount of money you’ll end up owing if the trade moves against you.4 The bank knows exactly how those dials work, and the math is no doubt hard, but anyone can figure out the gist: The lower the probability that you have to write the bank a check, the bigger that check has to be.
Levine explains in very simple language the problem, and Risk underscores the “impossible to understand” math used in the presentations to the client. Then he concludes:
All these swaps-gone-wrong cases revolve around exactly who was being bamboozled. MdP’s finance executives couldn’t have thought that Santander was paying them three percent a year for nothing. They knew they were taking a risk with the taxpayers’ money they were managing. The question is, did they want to take that risk in a ludicrously complicated and leveraged way so they could look like heroes for saving money while hiding the risk? Or did they take the risk in a ludicrously complicated and leveraged way because the bank tricked them into taking more risk than they wanted? Did the bank outwit the customer, or did the customer outwit itself?
What has happened to the people in the companies who made these deals? Nothing basically – although the lawsuits are still going on. Until these countries put some of the people in jail, nothing will change for the future. And if they don’t put anyone in jail, doesn’t that mean that the entire country is nothing but a corruption paradise?
The wonders of modern European “democracy.” Woopie!
But obviously almost everywhere in Europe they are shoving homosexuality down everyone’s throats as normal, so it’s OK. 😉