

European Debt Worries: Why Greece Matters - cwan
http://www.economist.com/blogs/freeexchange/2010/02/european_debt_worries

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dean
"The real damage [from the collapse of Lehman Brothers] was the message the
failure sent--that the government might not do everything it could to prevent
struggling firms from failing chaotically."

Does this mean the capital markets knowingly take extraordinary risks fully
expecting a government bailout if they fail badly enough, but pocketing the
profits if luck goes their way?

Are the ultimate free market advocates on Wall Street secretly non-believers
in free markets?

~~~
anamax
> Are the ultimate free market advocates on Wall Street secretly non-believers
> in free markets?

What makes you think that the Wall Street folks are free market advocates?
(Goldman Sachs, in particular, is a huge believer in govt intervention,
perhaps because almost all of the folks in govt making such decisions have
Goldman ties.)

In other news, big biz isn't a free market advocate either. GE is lobbying for
govt mandates for its products. Walmart is lobbying to increase the health
insurance costs of its competitors.

If you don't want big biz running something via govt, you can't let govt run
said something. Regulatory capture is how things work.

~~~
dean
> What makes you think that the Wall Street folks are free market advocates?

Good point. I guess I believe everything they tell me on CNBC. ;)

~~~
anamax
> Good point. I guess I believe everything they tell me on CNBC. ;)

CNBC's audience is investors, not wall street folk.

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alexandros
Just to make a factual correction, Greece has not 7, but close to 11m
population. I expect the economist to get these things right.

~~~
yungchin
Well, in their defence, they're quoting an external source verbatim (of
course, a footnote pointing out the error would have still been nice).

~~~
eru
I just checked if it could have been the size of the workforce. But that's
seems closer to 4M. (Using
[http://en.wikipedia.org/wiki/Economy_of_Greece#Maritime_indu...](http://en.wikipedia.org/wiki/Economy_of_Greece#Maritime_industry)
as a source.)

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euroclydon
So banks everywhere are sitting on a bunch of assets that scare the hell out
of them, or have the potential to scare the hell out of them; they don't feel
the assets have enough intrinsic value, without the guarantee of some
government or central bank backing them up. If that government or central bank
doesn't come through, then these banks will all race to dump these assets.

I'd like to see an article sort through one of these jittery bank's assets and
place them into the two categories: 1) scares_the_hell_out_of_me, and 2)
I_feel_pretty_good_about_this.

I wonder if we'd find the scary ones are strip malls in underpopulated areas,
MLM schemes, sub-prime mortgage debt, and that the good ones are core
manufacturing, agriculture, minerals, etc. If so, what's wrong with the banks
dumping the crap?

~~~
loganfrederick
The problem is that most of these assets, on an individual level, are small
enough to not have to be explicitly disclosed publicly, making such an
analysis near impossible for an outsider.

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proemeth
Europe (with ECB's support if necessary) won't let Greece default.

~~~
gaius
Can you say moral hazard much? The EU _really_ doesn't need to set a precedent
for the mismanaged economies of the south dumping their debt on the strong
economies of the north.

~~~
yungchin
That's nice rhetoric, but the fact is that there's no us and them, there's
only us. We've had a monetary union for about a decade now - we opted-in on
sharing each others pains.

Krugman thinks the euro was a bad idea to begin with, you might find that
interesting to read: [http://krugman.blogs.nytimes.com/2010/02/05/the-spanish-
trag...](http://krugman.blogs.nytimes.com/2010/02/05/the-spanish-tragedy/)

~~~
gaius
True, but the Greeks opted in on fiscal discipline too... Oh, wait.

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patrickgzill
Again, the Economist is a tad late to the party, see this thread, started
November 22nd, 2009 (from an article in the UK Telegraph):

<http://goldismoney.info/forums/showthread.php?t=426217>

