Tweet
Moral Hazard is Here
AMY GOODMAN: And the significance of President Obama being there, and what this means—the meeting of the G20, what is happening in Greece—for the United States?
MICHAEL HUDSON: He’s making the threat that Europe has to cut its own throat in order to save the United States hedge funds and banks from taking a loss on the Greek bonds that they’ve insured. One of the reasons that people have been willing to buy Greek bonds is they bought credit insurance. And the European banks, mostly—maybe not Barclays or Deutsche Bank, but most banks—are not willing to write credit insurance, because everybody at the Böckler Foundation conference here in Berlin, every single economist says there is no conceivable way in which Greece can pay its debts. But the American hedge funds and bankers have come in and said, “We’ll write a guarantee.” Then they lean on President Obama and Tim Geithner to tell the Europeans: “You have to make Greece pay, so that we win the bets that we’ve made, because if we lose the bets, then we go under and the stock market crashes, and a lot of people can’t collect on their money market funds.” So this is just naked brute force that Mr. Obama is doing. He’s basically telling Europe, “Don’t go the democratic route. Support Wall Street.”
http://www.nakedcapitalism.com/2011/...in-greece.html
AMY GOODMAN: And the significance of President Obama being there, and what this means—the meeting of the G20, what is happening in Greece—for the United States?
MICHAEL HUDSON: He’s making the threat that Europe has to cut its own throat in order to save the United States hedge funds and banks from taking a loss on the Greek bonds that they’ve insured. One of the reasons that people have been willing to buy Greek bonds is they bought credit insurance. And the European banks, mostly—maybe not Barclays or Deutsche Bank, but most banks—are not willing to write credit insurance, because everybody at the Böckler Foundation conference here in Berlin, every single economist says there is no conceivable way in which Greece can pay its debts. But the American hedge funds and bankers have come in and said, “We’ll write a guarantee.” Then they lean on President Obama and Tim Geithner to tell the Europeans: “You have to make Greece pay, so that we win the bets that we’ve made, because if we lose the bets, then we go under and the stock market crashes, and a lot of people can’t collect on their money market funds.” So this is just naked brute force that Mr. Obama is doing. He’s basically telling Europe, “Don’t go the democratic route. Support Wall Street.”
http://www.nakedcapitalism.com/2011/...in-greece.html