Tag: contagion

Feb 07 2010

The ouzo effect

  A strategist at the Deutsche Bank had something interesting to say last week regarding the economic crisis in southern Europe.

 “The problems currently faced by peripheral Europe could be a dress rehearsal for what the U.S. and U.K. may face further down the road,” Jim Reid, a strategist at Deutsche Bank in London, wrote in a research note today.

 It seems impossible that what is going on in Greece has anything to do with America. After all, Greece has defaulted on its debts so often over the last two centuries that you could almost set your watch to it. It was always contained in the past because Greece’s economy is so small, so why would this time be different this time?

 And yet, it isn’t contained this time. It is spreading and no one knows how far it might go.

Feb 15 2008

The Dishonesty Plague

We think of plagues as widespread outbreaks of disease affecting our bodies. The worst recorded plague was the Black Death bubonic plague that killed about one third of the population of Europe in the 14th century. Today, modern nations have conquered the old biological plagues, but a new kind of plague bedevils us: a plague of institutional dishonesty.

The past year has brought revelations of steadily deteriorating conditions in financial institutions. The consistent and widespread character of the problem points to a single cause, the steady advance and normalization of dishonest practices in the financial community. This process of exponentially increasing corruption has now reached an inflection point where serious damage is being caused, as financial markets seize up and major institutions are threatened with collapse.

Yet nowhere in the commentariat is this problem honestly assessed. It is viewed as a mysterious glitch that calls for a quick fix. This essay addresses how institutional dishonesty became a plague and how we can cure ourselves.