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Can Anyone Protect the Euro?

Well, here we are in a fine financial mess again, and one is inclined to say, “Well, I didn’t cause it, why should I have to pay?” This is, of course, a very good question, and one that is on the lips of millions of people. I have debt, but I am responsible, and servicing that debt rather boringly comes before buying something nice or going on holiday. But, I say that the fault doesn’t really lie with the borrowers, because, for the most part, they feel that if the banks will lend, then it’s OK. They feel that they can handle the situation because they have jobs and prospects. But then the bubble bursts and the lay-offs come and the debt-load becomes something that cannot be handled.

The fault lies with greedy and irresponsible bankers who lend too much too easily. Banks are so important that they cannot be allowed to fail completely these days. The various governments have little choice but to pick up the pieces and perform the necessary bailing out. But it is at this point that it is good to remember that governments don’t actually have any money – they only have taxes. This means that you and I are the ones who must pay, time and time again.

Countries also cannot be allowed to go bankrupt. A country is not a company, and the receivers cannot just take over, break the country into pieces, sell them off to the highest bidder and return the funds to the creditors. Other countries must pitch in and help. In a way, the problem lies with democracy, because politicians rarely want to make unpopular choices. If a family is in financial trouble the spending stops, the meals get simpler and clothes get repaired instead of replaced. No investment is made in new furniture, cars or electronics. The family, democratically or otherwise, is forced to make unpopular choices, tighten their collective belts and go without. Political parties who force their electorate to do the same are usually on their way out!

The whole economic system is basically out of control, at least from a government level. From a corporate level I suspect that the system is working perfectly for the benefit of the few, at the expense of the many. If banks don’t lend, they don’t make money. If individuals can’t borrow, they can’t spend on those bigger items like housing, cars, luxury furnishings and electronics, holidays and the like. If individuals and smaller companies stop spending and investing then the whole economy starts to take a downturn, spiraling on down to the next depression.

Stronger controls on lending may help to protect against such deep depressions, but may also prevent happy boom times also. Perhaps we need to protect ourselves more, keep a little money in reserve, keep the debt level realistic, don’t keep all our eggs in one basket – and always have a Plan B.

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