Friday, February 26, 2010


Ever since George Soros shorted England in ‘92, there has been a growing market for profiting on the misfortunes of countries. The latest turmoil relating to Goldman Sachs’s role in lending to countries they then bet against, with the infamous but still beloved credit default swap, is a good thumbnail of the problems of Greece. The Times reported that a value-free company in London innocuously named the Markit Group introduced something called the iTraxx SovX Western Europe index, which “let traders gamble on Greece shortly before the crisis.” Remember Santayana’s famous line, “those who cannot learn from history are doomed to repeat it?” Having achieved success with insurance companies like AIG, major investment banks like Goldman Sachs are applying the lesson to countries. The concept of short selling, the stock market’s way of allowing folks to profit on the problems of others, is the financial equivalent of the psychological concept of schadenfreude, the enjoyment of other people’s suffering.  It’s fun to see someone fail at a lifetime’s work— almost as much fun as seeing an acrobat fall from the high wire. But is it profitable? Savvy investment banks have their cake and eat it too. Before Greece there was Iceland, and there was a period in 2009 when Great Britain was called Iceland on the Thames. It’s like hunting season. You can almost hear the barking of the hounds and the blare of the horns as a bevy of financial experts from overdeveloped countries track down their undeveloped brethren, whose bounced checks reek of taramosalata. “It’s like buying fire insurance on your neighbor’s house,” says Philip Gisdakis, head of Unicredit in Munich, in the Times article, “you create an incentive to burn down the house.”  Profits being what they are, one begins to wonder about the turmoil in our world today. Ever hear of arson?  

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