Over the last year, several posts of mine addressed European debt crisis issues. The problem is the link between Euro-zone sovereign borrowers and lenders. The risk has always been systemic within the Euro-zone to the extent that banks lent too much to governments which borrowed money also to save banks. We cannot see where this Ponzi-type scheme ends, but we can see that some countries are heading to a crisis similar to the sovereign default of Latin America in the 1970’s. On the other hand for some countries the sovereign debt is indeed external debt (held by banks in other EU countries), which makes the domino-effect likelier. It's true that it's not about Ireland or Greece anymore. Actually it has never been..
I still contend that it's not only a matter of the Europeans completing their monetary cordon sanitaire but it's a matter of restructuring the Euro-zone debts via common issuance of EU bonds. Any ECB's decision to put more money in circulation by buying government bonds is just the Ponzi's never ending story. Actually what should be done is to start writing-off all those loans/bonds which the banks count as assets because they were expecting to be paid back, and the money in the Euro-zone would be counted simply as destroyed.
Tuesday, November 16, 2010
Thursday, November 4, 2010
Just one year ago I published the following post about The Fable of The Bees: or, Private Vices, Public Benefits.
I am pretty much convinced that the Fable of the Bees is not just a tale but an Italian reality show and Berlusconi's way to reform the country.
Remember that the author of The Fable of the Bess, Bernard Mandeville, argued that "a libertine, for example, is a vicious character, and yet his spending will employ tailors, servants, perfumers, cooks, and opportunist female and/or male prostitutes. These persons, in turn, will employ bakers, carpenters, and the like. Therefore, the rapaciousness and violence of the base passions of the libertine benefit society in general."
I wonder if that is the case in Italy or somebody should study more economics (Mr. Mandeville was a political economist...).