I remember the good old days when we only had to worry about small banks going out of business. Then big banks started to go out of business, then non-bank financial institutions, and now small countries. The problem with having a lot of debt is that, with some exceptions (“too big to fail”), bad things happen when your investors get nervous. My memory is not photographic as some of the legends about me say, but I am sure I would remember if the works of Adam Smith included the phrase “too big to fail.” — Garry Kasparov What are the odds that people running companies or countries will make smart decisions about money if they don’t need to make smart decisions — if they can do just as well or better making dumb decisions and being rescued from the consequences? According to the government debt chart below, the next countries… Read more →
EppsNet Archive: Portugal
The Problem With Debt
These are all from today’s headlines: Ireland told: Take EU bailout or trigger crisis – The Guardian Euro under siege as now Portugal hits panic button – Montreal Gazette Greek deficit much bigger than estimate – The Guardian Thirty years ago, we had the savings and loan crisis. Those were the good old days, when investors were only nervous about small banks. Investors have since become nervous about big banks, then non-bank financial institutions, and now small countries — Greece, Portugal, Ireland . . . That’s the problem with debt — bad things happen when your investors get nervous. What’s next? Medium-sized countries, obviously — Italy, Britain — and eventually the biggest of the big: the United States. Read more →