As I (finally) understand the basic idea of how credit default swaps and complex financial instruments can be used to rig the debt numbers of entire countries, it becomes clear that entire nations behaved no better than those individuals who simply live above their means via credit cards for great lengths of time. I’m no longer even slightly surprised by any of this. My parents used to tell me that money makes the world go round and that money is the root of all evil, two common cliches. Well, now I understand them a little better.
For example, in the 1990’s France agreed to take on the pension obligations of a major national company, France Telecom. The French government received a one time payment of about US$ 7 billion in return for assuming the pension obligation. France was able to show this money as an asset to help their bottom line in their quest to join the Eurozone. Fast forward to today. The obligation of that pension group now? At least US$ 24 billion. So much for improving the bottom line.
A much more detailed explanation with fancy charts and graphs, etc, can be had here.
