The european debt crisis
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The European Debt Crisis. What caused the global recession of 08?. And thus caused the European debt crisis. Basic Economics - The Bank Run. “It’s a Wonderful Life”. America Sneezes and the World gets Pneumonia!. The Housing bubble bursts 2006. The bubble burst.

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The European Debt Crisis

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The European Debt Crisis


What caused the global recession of 08?

And thus caused the European debt crisis


Basic Economics - The Bank Run

  • “It’s a Wonderful Life”


America Sneezes and the World gets Pneumonia!

  • The Housing bubble bursts 2006


The bubble burst

  • By August 2008, 9.2% of all U.S. mortgages outstanding were either delinquent or in foreclosure. By September 2009, this had risen to 14.4%. Between August 2007 and October 2008, 936,439 USA residences completed foreclosure.


The American Recession of 2008

  • Adjustable rate mortgages/Subprime mortgages

  • Lehman Brothers & mortgage securities (MBS)

  • Fannie Mae

  • Moodys and other bond rating agencies

  • Property taxes


What Caused the Crisis?

  • American Housing Market

  • UK Housing Market

  • Profligacy in the PIIGS

  • Decades of Low Interest Rates

  • Inflation in Wages and Goods

  • Overleveraged Banks

  • Lack of competitiveness


European Exposure to US Housing Bonds

Country Banks Losses

  • Britain

    Royal Bank of ScotlandUS $15.6 bn.

    HBOS US $9.5 bn.

    Barclays US $6.7 bn.

  • Switzerland UBS US $48.6 bn

    Credit Suisse US $13.7 bn.

    -

  • Germany

    BayernLB US $14.4 bn.

    IKB Deutsche Industriebank US $14.0 bn.

    Deutsche Bank US $12.7 bn

  • France

    BNP ParibasUS $5.8 bn.


Debt in the Euro Zone (17 of 27states)


Debt in the Euro Zone (17 of 27states)

  • Can the Governments in Greece, Portugal, Ireland, Spain and most importantly Italy cover their $4.2 trillion in borrowing without wrecking European banks?


Greece as a Case Study

The darkening clouds of civil disobedience and anarchy in Greece


European Exposure

The end of EMU – “Europe’s Melancholy Union”


Will Greece bring down the Euro?


Which Path to Recovery?Austerity (Taxes, spending cuts) or Growth (Tax and regulation cuts)


US Response – Ambassador Smith (CU Grad) and Secretary of State Clinton

The Fed v. The European Central Bank


The US Solution vs. the European one


What can they do?

  • The Greek gray economy/Greek culture

  • Euro zone writes off half of the Greek debt – EFSF

  • Do the Germans, French and Dutch have to continue to pay?

  • Austerity and taxes vs. Priming the pump

  • Growth – Competitiveness, bureaucracy, deregulation, labor & the welfare state (The German example)

  • The ageing population

  • Integrate or Disintegrate

    • Break up the Euro or even the EU (Nationalists – Anti-globalists)

    • More Sovereignty to Brussels


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