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Economics

Save Europe by Saying No to Bank Borrowing: Laurence Kotlikoff

Dec. 14 (Bloomberg) -- The euro crisis threatening the global economy is not about countries going broke. It’s not even about saving the euro. It’s about saving the banks, for the second time in three years.

The banks need saving not because they bought toxic assets such as subprime mortgages or the government debts of Greece, Ireland, Italy, Portugal or Spain, and not because they are too large, overrated or under-regulated. They are in trouble because they bought risky securities with other people’s money, and they have to pay it back. They borrowed to gamble, lost yet another fortune and are facing a massive run.