-Highlights Economic Recession from point of view of Iceland, Ireland, Greece, Germany and California
- Iceland–fell into recession because they played the investment banking game. All the smart people went into investment banking (no other real opportunities). Iceland’s entry into the investment banking game was very fast–20 or 30 years ago, they weren’t doing this sort of investment.
- Ireland–problem was that the Irish government guaranteed all loans by Irish banks, effectively allowing them to make big bets. Assumption too, was that real estate would never go down.
- Greece–problem was that they were let into the EU. Before, it was difficult for Greeks to get long-term loans. Typically there is a lot of corruption and it Greeks are not credit worthy as a society. Greece joined the EU by saying that they had managable debt-to-GDP ratios (like 5% or something), but the problem was that Greece fudged the numbers to make their credit worthiness attractive. All of a sudden, by joining the EU, Greeks could obtain long term loans for low interest rates. They kept government employee benefits off the books. Something about monks becoming real estate moguls. Now, Greece owes a lot of money and the only country who can effectively bail them out is Germany.
- Germany–joined the EU implicitly as the only big player. Denmark and the Netherlands have similar stability, but no one has the size of Germany. Germans made a lot of bets on US subprimes. So much so that they were buying subprime securities when everyone else stopped. Germany remains the only country able to economically solve the EU problem, but the political will might not be there. Also, there is a lot of pride for German’s being in the EU–seen as a way to move beyond the recriminations of WW2.
- California–highlights stories of Arnold Schwartz…as governor. California deemed the scariest state in the US. Key point–states pass debt problems onto cities, so there are cities in California that are going bankrupt.
-Factoids/quotes:
If you superimposed the level of household debt with levels of obesity in the US, the two would overlap.
“leverage buys you a glimpse into the prosperity you haven’t really earned”
“by going into debt, you are making a choice that what you are buying with that debt now is worth the sacrifice of having to pay a cost later on” — kind of like saying, if you go into debt it should be worth the cost you will pay later, because you will pay it.
Book Summaries. Less than 272 words. 