“Der Spiegel noted with disapproval that “the total value of all outstanding mortgage loans in the United States—$11 trillion (€7.6 trillion)—is almost as large as the country’s gross domestic product.” Surely, the good burghers of Brussels and shopkeepers of England wouldn’t be so foolish with debt, would they? But in Europe, “they embraced financial capitalism and leverage more than we did,” says David Smick, founder of The International Economy magazine and author of “The World Is Curved.” The assets of tiny Iceland’s big banks were about 10 times the island nation’s gross domestic product. Martin Wolf, the magisterial Financial Times commentator, noted that the combined assets of Britain’s Big Five banks are four times the Sceptered Isle’s GDP. The assets of JPMorgan Chase, the largest U.S. bank, add up to about 7 percent of America’s annual output.”
Europe today is somewhat schizophrenic. Its economy is at once cosmopolitan and integrated—goods, services, capital and people flow freely within the European Common Market—and stubbornly parochial and nationalistic. While the European Central Bank controls monetary policy for the entire euro zone, member countries regulate their own banks. Most Europeans use the euro, but the euros sitting in banks are insured by more than two dozen different deposit insurance regimes. The continent’s banks have behaved like Ferraris—souped-up hot rods zipping from the autobahn to the autostrada—while the continent’s regulatory system is like a Yugo.”
Now I am just waiting on an article that explains how those incredible geniuses that celebrated the “Brazilian decoupling from the US” were so amazingly wrong.