Yet despite the risk of bankruptcy, only a few of those major institutions went bankrupt – LehmanBrothers, for example. As stated above, many steps were quickly taken to save them and get them out of bankruptcy.
As for the nations, they had a different destiny. As anticipated, the bailout plans brought the euro zone into a deep crisis: an economic depression on a scale not seen since World War II.
Despite all the information about the European crisis in the media on the problem of public debt, very little has been published about its origin, located mainly in the banking crisis, and not in the massive public expenditures, as they say. Commonly.
For a more in-depth analysis, it is also necessary to understand the mechanisms used by the financial system, the “creativity” of financial markets and products, such as derivatives and other assets without a trace, that allow investors to “profit from changes in prices. prices of reserves, indices, raw materials and other existing assets ”(4).
Derivatives have spread in the financial markets and were transferred to pension funds, sovereign wealth funds or other types of investments around the world. As prices did not follow expectations, a large volume of insurance was activated, leading the banks to a series of financial crises.
It is important to note that, at that time, “the insurance average was level at 27 times 1, i.e. they had lent 27 times their capital ”(5).
In Ireland, the National Agency for Asset Management (NAMA) was created in 2009 as an attempt to save the financial system, nationalizing private debts in exchange for public bonds (on which banks exercise all kinds of speculation).
These procedures cause the “socialization” of bank losses, with serious effects on the lives of tax-paying citizens (6).
Despite all the consequences for national economies and the immense social costs of the measures adopted by governments to rescue the financial sector, the financial institutions themselves do not accept any kind of legal restriction, so their activity continues to be deregulated.
Unlike other assets, which are subject to many legal limitations, derivatives have almost no control and no transaction costs. Banks and other corporations can still recklessly issue new assets and speculate on them.
To help banks replace part of the large bubble of “toxic assets”, nations issued currency (such as the United States, as revealed by the audit carried out by the Department of Government Accounting that proved that US $ 16 trillion was passed on to banks by the FED), or created public debt by issuing sovereign bonds, among other instruments.