When Countries Turn Into Banks

When the economy collapsed in 2008, I tried to figure out what happened as best I could. Although I couldn’t personally set up a CDO, I have a rough understanding of CDSs and how they were used to leverage funds in MBSs. Even though it totally screwed our economy, following along as it unraveled was addicting. It also served as a huge real-life example of the downside to groupthink and the incredible depth of psychopathic capacity in some individuals.

Looking back, I can’t help but wonder about the lack of attention on the banks before the financial crisis. Was anybody predicting the looming crash? Is anyone paying attention now? What’s the next big crash?

Enter the Dec. 3 episode of NPR’s Planet Money: Is Europe’s Bailout a Giant Shell Game? The segment sets up the present-day fiscal woes of Greece and Ireland, how the efforts to prop them up are eerily similar to circumstances in the U.S. before Lehman Brothers went under and the credit markets froze.

Europe is borrowing money to bail out countries that got in trouble by borrowing too much money.

Satyajit Das explains that European countries aren’t actually putting their own money into that trillion-dollar bailout fund. Instead, the fund will borrow from investors around the world — the same investors who are growing wary of lending to a bunch of countries in Europe.

If you want to learn more about the world’s next great financial crisis before it unfolds, check out the episode.