This morning I read that, since a "bailout" has been arranged for Ireland, the investing world continues aquiver lest the rest of Europe slide into the sea.What kind of craziness is that? Here's Paul Krugman last week in the NY Times:
" the Irish story began with a genuine economic miracle. But eventually this gave way to a speculative frenzy driven by runaway banks and real estate developers, all in a cozy relationship with leading politicians. The frenzy was financed with huge borrowing on the part of Irish banks, largely from banks in other European nations.Then the bubble burst, and those banks faced huge losses. You might have expected those who lent money to the banks to share in the losses. After all, they were consenting adults, and if they failed to understand the risks they were taking that was nobody’s fault but their own. But, no, the Irish government stepped in to guarantee the banks’ debt, turning private losses into public obligations.
Before the bank bust, Ireland had little public debt. .... These debts were incurred, not to pay for public programs, but by private wheeler-dealers seeking nothing but their own profit. Yet ordinary Irish citizens are now bearing the burden of those debts...... spending cuts have caused a severe recession so that in addition to taking on the banks’ debts, the Irish are suffering from plunging incomes and high unemployment."
This all sounds to me a lot like what happened here in the US. The most alarming part of it is that having been bailed out with public money, the financial industry appears to think that everything is now back to "normal"...normal, that is, for people don't walk on the ground, but live in some "built environment" out of touch with rain, mud, heat, or unemployment. It wouldn't matter what they thought if their opinions didn't run the world, but the wealth-holding class has called the shots all through history, and really still does.
