Global banks are still sitting on mountains of bad debts that will never be repaid. The extend and pretend phase permitted by central bank liquidity bought some time but has done nothing to clean out and reset the system. Meanwhile the regular folks who foolishly took advice from the reckless loan sellers continue to pay the price, literally stuck in limbo like this debtors village in Hungary. Here is a direct video link.
Back in the mid-2000’s I remember some financial “experts” talking about the “brilliant strategy” of borrowing in other currencies in order to get lower mortgage rates than were available in one’s home currency. Lower rates allowed people who could not afford a house to buy one! It also allowed those who could only afford a small house to buy a more expensive one…great idea for those who were selling the products…made for a much larger pool of buyers. Predictably catastrophic idea for those did the borrowing and buying though. As the loan based currencies strengthened, the borrowers were thrown into default. Meanwhile the bankers who collected the commissions and bonuses upfront made off like bandits. Literally.
Which brings us to the problem with high risk, self-destructive financial advice, products and strategies, they often look great at the outset. They may even appear to be working for a while, maybe even a few years. While they appear to work, people want to believe and ignore probable outcomes allowing the architects and sales force to look brilliant and extract huge financial rewards up front. Then when high risk concepts and assets blow up, tragedy hits the people who bought. And the public purse is tapped for funds to help clean up the mess. It would be great if we could nip this vicious circle in the bud one of these times. But that requires people to stay sober, manage risks and take protective steps for themselves before the losses hit.
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