It's reassuring, if inevitable, that Germany being the eurozone's dominant economy is now preparing to bail out Greece, constructing a firewall to ensure the debt crisis doesn't spin out of control. "We've had to face up to the fact that what is now a Greek problem could turn into a European one," a German government official told the Financial Times. "We're thinking about what we should do if the crisis spills from Greece into other euro countries. So it's more about finding firewalls, containing the problem, than principally about helping the Greeks." He added there were "no concrete plans" as yet.
Not surprisingly, stocks around the world rose on the news. A Depression in Europe might be averted.
What then to make of this report in Der Spiegel that Goldman Sachs actually helped the Greek government hide its debt? What to say about Goldman Sachs helping to create a financial crisis?
This is how it worked. The Greek government borrowed in dollars and yen, and that was swapped back into the original currency at a later date. Nothing unusual about that, governments do that all the time. But Goldman Sachs did a deal where the Greeks got more than what their Euros were worth and in that way, they got additional credit for up to $1 billion. And now for the dirty bit. The extra money was classified as a cross currency swap so under the accounting rules, it doesn't show up as debt. In other words, Goldman Sachs engineered a deal where the Greeks took on more debt without it showing up in their books. Goldman Sachs helped pull off some accounting shenanigans and now the world, in particular Germany, is paying the price.
This needs to be investigated. If it's all legal, stricter rules need to be put into place because it has put Europe, and the global economy, on the brink of financial catastrophe.
no comment untill now