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Diane Rehm Show: Europe’s Expanding Debt Crisis

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May 02, 2010 – Comments (4)

This is a very good interview that is worth an hour of your time, especially if you are not familiar with the debt crisis in Greece, and the state of Spain, Portugal and Ireland sovereign debt. The panel is:

Eswar Prasad -- Senior Fellow at the Global Economy and Development Program at Brookings, Senior Professor of Trade Policy at Cornell University and former head of the China Division at the IMF.

Simon Johnson -- professor of entrepreneurship at MIT's Sloan School of Management, a senior fellow of the Peterson Institute for International Economics and author of the book "13 Bankers."

Uri Dadush -- senior associate and director in Carnegie’s International Economics Program, former director of international trade and former director of economic policy at the World Bank


The commentary (for the most part) is very good. There is unfortunately a bit of economist gobbeldy-speak but I found the comments by Simon Johnson in particular to be very interesting and worthwhile

Topics discussed are: soverign debt, the IMF's role, the G20's role, debt to GDP ratios, issues particularly relevant to Greece in solving the problem, etc.

Listen here: http://thedianerehmshow.org/shows/2010-04-29/europe%E2%80%99s-expanding-debt-crisis

4 Comments – Post Your Own

#1) On May 02, 2010 at 1:28 PM, TMFLomax (48.27) wrote:

Thank you! This was definitely a good listen.

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#2) On May 02, 2010 at 2:04 PM, binve (< 20) wrote:

TMFLomax,

Thanks Lomax!..

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#3) On May 02, 2010 at 5:07 PM, amassafortune (29.37) wrote:

Did you catch the fact that this deep debt discussion is brought to you via WAMU radio?

I first learned in this Mish article that accounting rules in some European countries do not require full disclosure of derivative deals.This gave both Goldman sales people (not client advisors) and politicians short-term incentive to add debt rather than make unpopular budget cuts.

"Accounting rules in Europe help keep derivatives deals hidden. Most local governments have no obligation to set aside cash against potential losses, and reflect only current-year cash flows in balance sheets." (from the Mish link) This was like getting a subprime loan, only reporting the beginning teaser monthly payment as a liability, and then taking out more loans with what appeared to be remaining free cash flow.

I agree that Greece and the PIIGS' troubles have strengthened the U.S. dollar and some EU money has flowed to U.S. markets. China's current consolidation patch has propped up the U.S. market, too.

I sure would like to know what the Fed holds and how much risk they have added to this economy to avoid having to make the tough choices. In the end, the Fed may have avoided cuts and asset writedowns, and been able to hide poor decisions because it is not subject to audit. As with Greece, unless inflation or recovery kicks in soon, the truth about the Fed's balance sheet may reveal itself. Fed secrecy may have the same cloaking properties and disasterous outcome as weak European accounting rules. 

 

 

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#4) On May 02, 2010 at 6:08 PM, binve (< 20) wrote:

amassafortune ,

Hey amass!

>>Did you catch the fact that this deep debt discussion is brought to you via WAMU radio?

:)

>>I first learned in this Mish article that accounting rules in some European countries do not require full disclosure of derivative deals.This gave both Goldman sales people (not client advisors) and politicians short-term incentive to add debt rather than make unpopular budget cuts.

Exactly! GS knew exactly how to work the system to hide the problems. And the fact that they took out massive CDS positions (much larger than any Greek debt exposure than they had) knew that this was also another timebomb to be profited from.

>>I sure would like to know what the Fed holds and how much risk they have added to this economy to avoid having to make the tough choices. In the end, the Fed may have avoided cuts and asset writedowns, and been able to hide poor decisions because it is not subject to audit. As with Greece, unless inflation or recovery kicks in soon, the truth about the Fed's balance sheet may reveal itself. Fed secrecy may have the same cloaking properties and disasterous outcome as weak European accounting rules. 

Amen!! If the Greek debt crisis was a ticking timebomb, then we have a ticking hydrogen bomb in the US. I even hear bonehead reporters talking about how GOOD this is for the US!! "Our bonds become stronger! We can finance our debt more cheaply, so that we can take out more debt and produce more stimulus!" .... Are you fu**ing kidding me?

I think Schiff is right on with the right quote for this issue: "We need that like we need a hole in the head"..

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