Risk is its own reward

It is always interesting how the perceptions of the world economy change so much faster than the world economy actually changes. Take the so called European debt crisis. Greece and the others have been borrowing to pay for the high level of benefits they gave their citizens to win elections. Certainly, anyone with a calculator could have figured out that they couldn't keep this up forever, unless of course some new source of wealth suddenly appeared like a Goddess of Gold stepping out of a clam shell.

The risk was there, but all of a sudden the perception of that risk became widespread. Now, there are reasons for this, not the least of which being that some people can make a lot of money as the perception of risk goes up. Now, there are some scenarios where the European Union would abandon its weak sisters and let them default, but these scenarios are really quite unlikely considering the impact such an action would have on their economy. Europeans are nothing if not pragmatic and while here in the United States, certain of our officials listened to political ideologues who said "Let a big bank fail" and then suffered the consequences, as did most of us, they will use the current crisis to get the population to accept the need for some austerity and reduction in social programs, improving the future bottom lines.

Now, it would be rather cynical, perhaps justifiably so, to say that we have a certain percentage of our population who value being rich above all else. These people have always existed and they are mentioned quite unfavorably in the bible. However, much like drug lords or people who made their money during prohibition, they feel that having a lot of money will ultimately justify their methods. For example, we know a few people got very rich as the subprime mortgage industry collapsed. There is actually nothing wrong with that, but what would be wrong would be manipulating things to make an event happen that could have been avoided. Certainly, as the subprime mess developed, some actions could have transpired to mitigate it. Of course the existence of the subprime mess is directly attributable to the same mentality of profit above all else.

Now, it certainly is not my intent to say that becoming rich is a bad thing. Bill Gates became very rich because he had the foresight to create a software company at the perfect time. Quite a few others also got rich that way. What is questionable is when you are placing bets while rigging the game. Goldman Sachs created instruments that were destined to fail, and it was likely they knew they would, at least partly fail. It is likely they didn't know that the subprime collapse would be as widespread as it became, because they probably didn't think the Government would let a company like Lehman fail starting the domino effect.

The Europeans are too pragmatic to follow that example.