Douglas Carswell's Blog

Euro bailouts a "Ponzi scheme"

An interesting perspective on the bailouts by the former head of Argentina’s central bank, Mario Blejer in last week's FT.  Argentina was, of course, a country that tried to artificially peg its currency to that of another, running a ruinous monetary policy in the process. The nightmare that unfolded only came to an end when Argentina eventually decoupled from the dollar.

As Blejer explains, Europe's response to the “debt problems of countries in peripheral Europe is ... to increase their level of debt”.  Far from solving a debt problem, the bailouts have just dragged us all in deeper. 

These bailouts are, he says, a “Ponzi scheme”, where “the inevitable default will only be allowed to take place when the vast part of European distressed debt is transferred from the private to the official sector”. 

In other words, those banks that made foolish investment decisions get ordinary taxpayers to pick up the tab for their mistakes.

Over at the BBC, meanwhile, Robert Peston thinks it “curious” that big bankers are in favour of all these Euro bailouts.  Apparently, "one of Europe's most influential bankers" is rather keen that public money be used to buy up bondholders worthless bonds on the bailouts. 

What the rest of us might find surprising is that Robert should be surprised.

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