When you live in a conservative family or in a conservative country it is very difficult to misbehave or live as you like. The solution in such conditions is to move out of your country and indulge in excesses. This was what happened in Germany during 2000-2007 period. German people are very conservative and are very reluctant to live beyond their means. If a bank offers a loan at very low rates they will not fall for it. This was not the case with Greece, Ireland, Italy, Spain and Iceland. People of these countries are poor cousins and always wanted to have everything that rich relatives in Germany and France had. Therefore they were ever ready to join European union and have a very strong currency euro. German Banks were too eager to lend them money and all the poor cousins were happy to oblige. They gave $21 billion to Iceland banks,$100 billion to Ireland banks and invested $60 billion in the US sub prime-backed bonds. They easily fell for the financial instruments designed by Wall street bankers like Morgan Stanley and Goldman Sachs. When Goldman Sachs and Paul Johnson collected mortgage based bonds that were sure to fail and made bets against them the buyers were Germans. The greed for big profits made them indulge in many activities they could never have indulged in Germany. To get the money back, German Government loaned the funds to European Union rescue fund which loaned them to Irish Banks. Irish banks paid the loans to German Banks with the money. Ireland took over the liabilities of Irish banks when they were on the verge of failure. Very clever?
Posted on: Tue, 02 Dec 2014 07:46:47 +0000