Monday, July 4, 2011

Extend and Pretend - the European Emperor's New Clothes

By John Clancy in Finance

David Copperfield's Mr. Micawber is always confident that something will 'turn up' to get him out of financial messes and Dickens's character has found its apotheosis in the current European and British financial system.

Everyone is hoping against hope that if we just wait a bit longer.....just a bit longer more....then all will come good in the European banking system and we can all breathe a sigh of relief that the financial collapse of only 2 years 10 months ago, and the worst recession since the 1930s caused by it, was just a bad dream.

And the current position with regard to the Greek bailout is another example of the Extend and Lend philosophy which simply tries to buy time in the hope that something, anything, might come to the rescue.

Well it won't.

I have always referred to what happened in the aftermath of the collapse of Lehmann brothers as the Financial Collapse Part 1. There was always going to be another one - because of the failure to deal with the September 2008 collapse at root causes.

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