Bailouts reward bad past behavior, encourage bad future behavior, and make the debt bubble bigger – thus increasing the likelihood of deeper economic problems. At the risk of stating the obvious, there’s a reason for the second word in the “moral hazard” phrase.
But I’m not surprised that politicians continue to advocate more bailouts. The latest version is the “eurobond,” sometimes referred to as “fiscal liability sharing.”
It doesn’t matter what it’s called, though, since we’re talking about the foolish idea of having Germany (with a few other small nations chipping in) guaranteeing the debt of Europe’s collapsing welfare states. Here’s how the New York Times described the issue.
When European leaders meet on Wednesday to discuss the troubles of the euro zone, France’s president…
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