- Jun 6, 2007
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The nutshell on the European Debt Problem is that certain countries in the European Union have such high levels of outstanding debt today and/or are growing those debt levels at a dangerous rate because of deficit spending that sovereign debt investors don't want to buy these countries debt(bonds) so these countries are having troubling borrowing money and are at grave risk in defaulting on their debts(bonds). As of today, the public commentary has always been how can the healthy European Union countries or how can the European Central Bank help these sick European Union countries borrow money so they can function. This conversation needs to change to a conversation that U.S. analysts periodically have when talking about U.S. Treasury securities and what America can do if Sovereign debt investors sour on these securities because of America's spendthrift ways this conversation is simply that the U.S. government can force a portion of U.S. pension funds assets, retirement savings accounts of individual Americans and if need be personal savings of Americans above a certain threshold to be kept in U.S. Treasury securities, that way, the U.S. Treasury can continue to raise money as they need it. Why doesn't the European Union compel these "credit raising impaired" European countries to do just that force their own people to lend them money, besides this empowering these countries to able to function economically this would create a very strong and invaluable leverage to get these countries to curb their spending and live within the limits they can afford which is the ultimate answer for the citizenry would be pressuring their politicians to not overspend so they could get paid on their bonds. These "spread the debt burden around" hawks are advocating foolishness because what is going to happen is these healthy countries will have to take on so much debt that their ability to repay their debts will be called into question and then they won't be able to borrow money plus this course it isn't fair to the citizenry of the healthy countries because they are left paying the bill for other countries where the other countries were mismanaged for years and it just isn't fair to expect someone else to pay for wrongdoing other people caused! With troubled European Union countries getting their own citizenry to help with the purchase of their own bonds it would make it much easier and less dangerous for the ECB to buy bonds from these countries.
The analysts are right that say the European Union should view things from the perspective that it doesn't have a sovereign debt problem among its states it has a financial institution industry problem that is what is really important, specifically what is meant here is that the real danger to the European Union isn't that some European Union countries will default on their debt it is that the banks throughout the European Union which in many cases hold high amounts of bonds from these economically troubled European countries when the defaulting begins will collapse in high numbers and banks are the engine of an economy they extend credit and provide reliable investor returns and if they collapse in high enough numbers their respective countries economies will collapse. These analysts are further right when they say the European Union need to get its respective countries to do what America did to fix its banks it needs to get an FDIC organization, a Comptroller of the Currency organization and a Treasury Arm organization with a capital fund it can shovel out and identify which banks in their country can be saved and which should be shut down because of too much toxic European Union debt on their books, the one that can be saved recapitalize and back stop all depositors accounts (like the FDIC). The European Union shouldn't create a common Euro bond to bailout troubled sovereign countries it should use the bond to recapitalize their banks that but for these toxic bonds would be healthy, have the respective European countries regulators swap out in these banks the toxic bonds for the Euro bonds and the way the Euro bond fund could work is that the toxic bonds could be thrown in the Euro bond fund and whatever is not paid due to default can be paid by all the European Union countries with the split being apportion to how much Euro bonds the country swapped into their banks, there would probably need to be limits on how many Euro bonds an economically troubled country could give its banks because its ability to pay the Euro bond bill would be limited!
The analysts are right that say the European Union should view things from the perspective that it doesn't have a sovereign debt problem among its states it has a financial institution industry problem that is what is really important, specifically what is meant here is that the real danger to the European Union isn't that some European Union countries will default on their debt it is that the banks throughout the European Union which in many cases hold high amounts of bonds from these economically troubled European countries when the defaulting begins will collapse in high numbers and banks are the engine of an economy they extend credit and provide reliable investor returns and if they collapse in high enough numbers their respective countries economies will collapse. These analysts are further right when they say the European Union need to get its respective countries to do what America did to fix its banks it needs to get an FDIC organization, a Comptroller of the Currency organization and a Treasury Arm organization with a capital fund it can shovel out and identify which banks in their country can be saved and which should be shut down because of too much toxic European Union debt on their books, the one that can be saved recapitalize and back stop all depositors accounts (like the FDIC). The European Union shouldn't create a common Euro bond to bailout troubled sovereign countries it should use the bond to recapitalize their banks that but for these toxic bonds would be healthy, have the respective European countries regulators swap out in these banks the toxic bonds for the Euro bonds and the way the Euro bond fund could work is that the toxic bonds could be thrown in the Euro bond fund and whatever is not paid due to default can be paid by all the European Union countries with the split being apportion to how much Euro bonds the country swapped into their banks, there would probably need to be limits on how many Euro bonds an economically troubled country could give its banks because its ability to pay the Euro bond bill would be limited!
