I might have added that one of the big problems leading to banking instability
in 2008 was no longer separating the activities of commercial (savings) and
investment banks. They had been separated under the Glass-Steagall Act of
1933. However, that act was repealed in 1999, and commercial banks could then
invest in the kinds of securities that brought on the crisis of 2088.
Ed
----- Original Message -----
From: Ed Weick
To: RE-DESIGNING WORK, INCOME DISTRIBUTION,EDUCATION
Sent: Monday, June 04, 2012 10:12 AM
Subject: Re: [Futurework] [Ottawadissenters] A little more on the Euro
Yup, you could do all kinds of things as long as the economy is healthy and
the banking system is stable. But sometimes the banks get into serious
trouble, as in the case of the subprime mortgage crisis of 2008. Governments
may then have to initiate costly programs like the Troubled Assets Relief
Program (TARP), which is what the US felt it had to do.
Ed
----- Original Message -----
From: Ray Harrell
To: 'RE-DESIGNING WORK, INCOME DISTRIBUTION,EDUCATION'
Sent: Monday, June 04, 2012 12:17 AM
Subject: Re: [Futurework] [Ottawadissenters] A little more on the Euro
You could charge the banks for services to the economy. Not just taxes
but tolls and as they charge Indian casinos here for state police, they could
charge the banks for protections against crime. They could also forbid
banks from hiring their own police. There are all kinds of ways that banks
and corporations that take advantage of national services and then become loyal
only to shareholders could be charged for services. Is that a beehive that
the banks really want to anger? Banks don't have armies, nations do, even
Greece. WWIII or just more fun with guns and bombs?
REH
From: [email protected]
[mailto:[email protected]] On Behalf Of Ed Weick
Sent: Sunday, June 03, 2012 10:38 AM
To: RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION
Subject: Re: [Futurework] [Ottawadissenters] A little more on the Euro
A couple of points, Lawry. One is that the banking system is highly
connected internationally. To lend money to the Greek or Spanish governments,
Greek or Spanish banks borrowed money from banks in other countries. The
impact would likely be similar to that of the American sub-prime mortgage
crisis of some four years ago. Via the widely traded Consolidated Debt
Obligations it was not only American banks that lost a lot of money, but
foreign banks as well. I think defaults by the highly leveraged members of the
EU would have a much larger negative impact than the sub-prime crisis.
The other point is that the EU governments of Greece, Italy, Spain, Ireland
and perhaps others (France?) have kept themselves going by borrowing huge sums
of money. If they defaulted, it is unlikely that anyone would want to lend to
them. What might that mean in terms peace, stability and living standards in
those countries?
Ed
----- Original Message -----
From: de Bivort Lawrence
To: [email protected]
Cc: 'RE-DESIGNING WORK, INCOME DISTRIBUTION,EDUCATION'
Sent: Sunday, June 03, 2012 10:17 AM
Subject: Re: [Futurework] [Ottawadissenters] A little more on the Euro
A simplistic question, but one that may, I hope, cut to the chase:
What is the problem if Greece and perhaps Italy and Spain simply default
on their debts, and do nothing else? I can readily see that lenders would
subsequently shy away from making any new loans to those countries, of course,
but...so what?
Can we build a damage/risk tree out from this initial question?
Cheers,
Lawry
On Jun 3, 2012, at 9:20 AM, Ed Weick wrote:
There seemed to be some agreement yesterday that exit from the EU by
Greece and perhaps others like Spain and Italy was inevitable. But is it
really? Greece, Spain and a few other countries have huge debts -- but debts
that are denominated in Euros. It is highly unlikely that creditors would
accept repayment in far less stable currencies like the drachma or the peseta,
and default by some of the larger EU debtors could wreak havoc with the
international banking system. Exit from the EU is, IMHO, most unlikely unless
someone steps in and provides the kind of bailout supports needed. Perhaps the
IMF or, as Barry suggested, Russia? For a countries like Greece or Spain,
would being beholden to Russia be better than being under Germany's thumb?
Ed
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