While many economists, specialists in international trade and finance, conclude that the crisis of excess indebtedness in the Eurozone is a collective problem, due in good measure to shortcomings in the design and implementation of the Single Currency, the creditors and their lawyers insist on blaming indidiual hapless borrowers who've lost control of their debt liabilities.
This, too, is a traditional sovereign credit workout strategy. A creditor places all the responsibility on the ONE particularly foolish or particularly recalcitrant borrower, convincing the other borrowers to isolate them. This frees the creditor country from having to undertake any of its own adjustment.
Lawyers will litigate for all the adjustment and rebalancing costs to be borne by the individual debtor/deficit country, the more defenseless the better.
This, too, is a traditional sovereign credit workout strategy. A creditor places all the responsibility on the ONE particularly foolish or particularly recalcitrant borrower, convincing the other borrowers to isolate them. This frees the creditor country from having to undertake any of its own adjustment.
Lawyers will litigate for all the adjustment and rebalancing costs to be borne by the individual debtor/deficit country, the more defenseless the better.
Economists know that it takes two to rebalance and reduce the unsustainable deficits AND the unsustainable surpluses: the debtor yes, but also the creditor.
Historians can show that inequitable rebalancing and credit workout solutions, ensure recurrent intenational payment crises (plural) and even wars. Where gun-ships in the harbour would take over the collections of customs duties, creditors now threaten to cut off access to international bank liquidity facilities.
We can even say that the problems of over indebtedness and accumulation of unsustainable external debt go well beyond the Eurozone, since we've seen them other countries such as Iceland, Latin America, Asia, etc. Excessive lending comes mainly from the TSU-MONEYS of hot money flowing from country to country, at the speed of a click and unimpeded by capital controls.
The "problem" only manifests itself when the inflows stop suddenly and reverse into sudden outflows, but it really starts much earlier. And regulators have repeatedly failed to prevent these TSU-MONEYS, and even promote them with poorly designed financial regulations and loose lending policies which facilitate the creation of assets bubbles with their inevitable crashes.
Mariana Abrantes de Sousa
PPP Lusofonia
Read more on
TSU-MONEYS http://ppplusofonia.blogspot.pt/2014/05/tsu-money-vai-e-vem.html
and TSU-MONEY alerts http://ppplusofonia.blogspot.pt/2013/03/tsu-money-alert.html
on balance of payment imbalances, bubbles and crashes by Pettis and Kindleberger http://ppplusofonia.blogspot.pt/2015/02/pettis-on-payments-imbalances-and.html
and on games lenders and borrowers play in advanced Debt Workout 201 http://ppplusofonia.blogspot.pt/2015/02/debt-workout-201-parte-1-entre-espada-e.html
Historians can show that inequitable rebalancing and credit workout solutions, ensure recurrent intenational payment crises (plural) and even wars. Where gun-ships in the harbour would take over the collections of customs duties, creditors now threaten to cut off access to international bank liquidity facilities.
The "problem" only manifests itself when the inflows stop suddenly and reverse into sudden outflows, but it really starts much earlier. And regulators have repeatedly failed to prevent these TSU-MONEYS, and even promote them with poorly designed financial regulations and loose lending policies which facilitate the creation of assets bubbles with their inevitable crashes.
And enormous suffering is had by all (the littlest people).
Mariana Abrantes de Sousa
PPP Lusofonia
Read more on
TSU-MONEYS http://ppplusofonia.blogspot.pt/2014/05/tsu-money-vai-e-vem.html
and TSU-MONEY alerts http://ppplusofonia.blogspot.pt/2013/03/tsu-money-alert.html
on balance of payment imbalances, bubbles and crashes by Pettis and Kindleberger http://ppplusofonia.blogspot.pt/2015/02/pettis-on-payments-imbalances-and.html
and on games lenders and borrowers play in advanced Debt Workout 201 http://ppplusofonia.blogspot.pt/2015/02/debt-workout-201-parte-1-entre-espada-e.html
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