In my May 31 article, Mediterranean Blues, I suggested that one possible reason why the P.I.I.G.S. of Europe (Portugal, Ireland, Italy, Greece, Spain) might be in financial and political turmoil is because of political corruption and over-borrowing. Over borrowing had been used to create artificial prosperity in the PIIGS’ economies for political gain – in a democracy, prosperity leads to re-election. Political corruption was doing to Europe what mortgage lending corruption had done to the USA: endangering the banking system and ruining the economies. Under my scenario, the nations of southern Europe were taking advantage of the good credit of the nations of the north. But there is another, more sinister possibility.
Perhaps the nations of northern Europe have intentionally victimised the nations of the south.
Costas Los, President and Chairman of the marine insurance company The Strike Club, offered a “more European” way of looking at the over-leveraging of the Mediterranean nations. He reminded me of a by-gone era in Europe: the era of European empire building; the days when Europeans colonized the world. He suggested that the same gene that inspired the Spanish Conquistadores, the British Empire on which the sun never set, France’s Napoleonic era and the German Third Reich; this same gene might be responsible for today’s European debt crisis.
Here’s what he inferred: the imperialist nations of northern Europe recognized that the southern European have-not southern European nations were asset rich and cash poor. With this in mind, the northern nations loaned the Mediterranean nations money they knew would never be repaid. Their goal was the confiscation of assets. Inevitably the Greeks and Italians would be unable to pay and their assets would come under the control of the lenders, the northern nations. Instead of Napoleonic or Nazi armies, this invasion would be done by an army of blue suited bankers. But the result would be the same: the Mediterranean nations’ assets would come under the control of the North Sea nations. Bankers’ imperialism.
Thank you, Costas, for this enlightening point of view. As North Americans, we often see the world from our own narrow prospective.
Ironically enough, that’s precisely what I encourage investors to do in my book, Beyond the Bull. I suggest that objective investors make more money than subjective investors. Objectivity allows us to make changes when we need to change. Who is responsible for Europe’s debt problems; the people of the north or the people of the south? If we think it is important for us to know, we should objectively examine both sides of the question. But one thing remains clear: who is responsible for our own personal finances. We are. And if the problems of Europe upset the financial system as the problems of the United States did in 2008/9, it is our responsibility to take action. We can’t afford to ride out yet another severe decline in the stock market. We need to take action.
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