Modern Expert Economics

Is when you borrow too much money, and then your “friends” fix your problem by loaning you more money – Mish notes the Irish bail out which has temporarily halted the Eurozone slide to destruction:

Market participants are giddy today on the great news that Ireland will go deeper in debt in a foolish attempt to bail out the German and UK bondholders who were in turn foolish enough to lend ridiculous amounts of money to Irish banks in various real estate schemes.

The Irish government was of course foolish enough to guarantee all of this foolishness which means that Irish citizens many of whom were sucked into buying property at foolish prices are now on the hook to bail out the bondholders, rubbing salt into the wounds of Irish taxpayers, not all of whom were foolish enough to freely participate in the general foolishness.

Got that?…

Yes, I do – though, usually, when some one does that to me I’d at least like to get flowers afterward.

Mish goes on to note that European banks are on the hook for $650 billion in loans to Ireland – a nation of 6.2 million people and a GDP of $228 billion. THIS IS IMPOSSIBLE. The money cannot be paid back – all they’re doing is moving the disaster from one place to another; in this case, from the idiots banks to the European tax payers.

Default is the only way out – not just for Ireland, but for the whole world. There is too much debt chasing too little wealth – and, as I keep yammering on about, the longer we stave off the crash, the worse it will be when it hits. They might have plugged the dike for now, but the flood waters are still rising.