Eurozone Leaders Reach Debt Deal, page 2

Originally posted by Aim64C
I am not quite understanding how -anyone- comes out ahead in that scenario. It's generally unwise to invest in government bonds issued by governments running a deficit. You're either going to be defaulted on or paid back your initial investment in a world of hyper-inflation - either way, you lose.

That would be true if the bonds were Drachmer denominated. However, the bonds are EURO bonds, which means that Inflation is off the table, as the ECB won't allow it. Sovereign default is off the table because the European politicians won't allow it after a great deal of lobbying by the financial industry. A writedown on the debt is the only possible solution left, and the financial industry were buying at deep discounts, because they knew that they would still make money on it.

It would seem the banks are doing exactly what they are paid to do - what protects their investors (which would be anyone with a savings account, basically).

You can always isolate each step in a series of events and say that each step was morally right, even if the plan in it's entirety was morally wrong. The problem is that it is another wheel in the machine that transfers wealth from those who have less to those who have more. That dynamic, historically, leads to revolution and a lot of dead people. It's like a drug dealer who knowingly OD's his customers.

First the financial industry helped Greece get into the Euro when it wasn't elligible, then they helped issue sovereign bonds, knowing that the bonds were unlikely to ever be repaid, then they helped Greece fudge the books, and when the house of cards finally tumble, they lobby to have the debt repaid in full, then buy bonds at a deep discount and agrees to take a book loss. At every step, the financial industry made money on Greece, money that was taken from greek taxpayers or retirees. The greek situation is a completely manufactured crisis.

edit on 28-10-2011 by aaa2500 because: clarification