The most stupid financial act anyone can ever commit. What's worse is to become a guarantor not even knowing what the real situation of the debtor is (and when do you ever really know anyway ?).
In 2008 the Irish government decided it best to guarantee the debt of the nations banks as they were teetering on bankruptcy. At that time, Ireland was in excellent financial shape with a debt to GDP ration of around 50%.
Guess what, the banks lied: their problems were much bigger than they let on and now the whole country is bankrupt.
In 2009 Greece told the world that it "discovered" a little problem: It never knew how to do any kind of bookkeeping. It's reported balance sheet should not be relied upon and its debt is apparently much higher than previously stated.
In any rational context, this would have led to bankruptcy and incarceration of the people responsible.
What happened ? European government officials decided that bankruptcy is out of the question and since government is always above the law, the only solution left was for them to co-sign Greed debt by sending them the money needed to pay off old debt.*
Now, two years later, markets around the world a rallying strongly as another time bankruptcy of Greece has been averted by a fresh money injection. Has the situation improved in the last two years ? No: debt is 25% higher, the economy is shrinking and the country is paralyzed by strikes and violent demonstrations against the policies of the government. Is there any hope of improvement in the next two years ?
Two years ago I advocated the Euro over the Dollar because the overall financial situation in Euroland is still much better than in the USA. Now I'm selling the Euro as the lawlessness and stupidity of European leaders has turned a very small problem into a many faceted disaster that keeps growing.
How can it be legal or moral to mortgage the future of our progeny to save the hides of our present day politicians ?
*just a really minor point: this also violated the agreements that were entered into when the Euro was created. One of the resulting lawsuits will be decided July 5th before the German constitutional court. Not to worry though, since courts have an abysmal record of deciding against even the most outlandish decisions of their respective governments.
