[np] Euro crisis

[David Morris]

Bankers Are Highly Trained Experts In The Lending Of Money Until
Things Go Wrong And They Turn Into Victims

http://thinkprogress.org/yglesias/2011/09/28/330502/euro-crisis-moneylenders/

Keith Humphreys on the Euroland crisis:
[...] "The system was set up financially such that one party could
spend far more money than it had secure in the knowledge that someone
else would have to pick up the tab."

Matt Yglesias:
I think that’s really mistaken, and it ill-serves the world to have a
one-sided narrative told by German bankers dominate the entire
discussion. Humanity has long had a system whereby someone can buy
something he doesn’t have the money to buy. It’s called borrowing. And
thanks to bankruptcy, you can borrow money secure in the knowledge
that somebody else may have to pick up the tab. This is why lenders
charge interest if you want to borrow their money. If you ask a
moneylender why his enterprise is so profitable, he’ll give you two
reasons. One is that the profits are a consideration in exchange for
the risks he’s running. The other is to observe that he personally is
making big money because he personally is skilled at the moneylender’s
trade. Spanish households borrowing money and paying interest are not
purporting to be skilled borrowers. They’re just regular folks
participating in a marketplace dominated by well-compensated
professional lenders, whose compensation is based on their alleged
skill at the trade.

Well, it turns out these guys weren’t actually that good at their
trade. When bankers sit down with borrowers to discuss loans, it’s the
lender who’s putting himself forward as a highly trained highly
compensated expert in the field of lending money. If it goes bad, it’s
because the allegedly expert lender has turned out to be bad at his
job. It’s the banks that loaned money to Greece who are saying the
German government ought to pick up the tab. It doesn’t say this in any
of the EU’s founding treaties — it actually says the reverse. The
Greeks would probably just as soon default and devalue as go through
this nonsense. It’s the governments of northern Europe who, by
offering to act as debt collectors for their domestic banks, have
created this situation where they’re left partially holding the tab.