European economic crisis a 'slow train wreck'?
James Shinn explains in simple terms
- Duration 4:19
- Date Feb 1, 2012
James Shinn explains in simple terms
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What's what's wrong here what's going -- to -- -- and this mask the size affect everybody -- too much money well that's.
That's how they got in this mess and it's been a problem brewing -- for quite some time ever since they agreed on the Euro.
Beckett back in the nineties.
What we're seeing right now I think is a pretty amazing slow motion train wreck.
And I just as the original your room deal.
Has finally come on one out.
And it's gonna have I think pretty important consequences including.
Lot of things -- usually talk about here weren't even on defense expenditure and and I was your previous conversation about the US but.
As you know the Europeans are.
Spinning around wound one and a half percent of GDP on their defense is right and a little fall and we -- is always on Libya I mean -- they can do some things progress or couldn't do much in the way of assisting us and is gonna get I'm afraid.
There that's going to be another fall out.
Government -- to come out of this.
I think Germans -- really there in the driver's seat right there.
They have all the excess.
Money to land to bail allowed to determine they in this sequence of us.
What's -- they have the money to bail out than the other.
Other indebted Euro nations particularly of the peripheral ones Portugal Ireland didn't rise to spend the -- -- -- -- perhaps time.
But they exercise -- -- on whether the European central bank and then they ECB.
Well actually bail out these other governments you know the ECB is not allowed.
To directly -- significance amounts of bonds let's say from -- time government and -- government.
And they've been doing it a sort of a round -- way discussion was spent close.
But the -- only the Germans.
Can give them the Green light to expand that facility.
They happen -- here if I understand -- married if these -- democracies right so they have to elect their leaders from Greece is now a situation.
Where its leaders are telling that if we want more bailout money from the Germans are being in the European Central Bank we -- tighten our belts and a pair -- says we can't retire.
At a young age reaction to work five days a week we have to work a long work day.
Are people gonna vote for that -- leader who says vote for me but I think we need to tighten about.
You know you put your finger on exactly the problem kick -- then elected politician.
In Europe for that matter you know any -- -- -- -- US governor.
To voluntarily engage in this kind of austerity is asking them to commit political suicide right so.
-- you've seen in already in Ireland and Portugal Spain and Greece.
As soon as one of these leaders endorses the austerity program -- Think about it -- yeah so and that it didn't matter whether there right wing or or or left wing government they get voted out on the new guys -- it.
So what ultimately happens when -- it's gonna classes eventually happen throughout the crisis is happening now.
One of the more -- mean to me one more surreal aspects of this.
Of this size negotiation we've seen here now is that they're trying to avoid a Greek default.
-- classroom but.
If you look in the market they've already default from Greek sovereign debt bonds.
-- Are treating it a fraction of their face value and and they're asking the bondholders to take.
Quote voluntary unquote haircuts.
-- there's another reason alone Greece anymore money right -- like Argentina I think Kevin's a lot of money more money they're not paying back the money they have can Greece declare bankruptcy.
And -- like an American corporation would declare bankruptcy.
Rivera for defaulting -- all the creditors -- kind of wiping the slate clean and starting over again I can't do this but beyond that you hundred.
Drachmas and now look at that that's what -- -- -- mean they just can't rule either way.
Now became another way out there and I cannot pay their way out and I kind of -- -- and -- in their way out.
They're not -- -- you know story so they're gonna essentially default.
OK so then what happens.
But something in the world but it's the end of the Euro but as goes crazy and a great -- -- it goes as goes Greece has -- Portugal.
Probably then the question is can Germans and the French contain this.
Outside of Spain and Italy.