Exactly, the problem has got worse. Banks are larger and more centralised, the offenders unpunished know they can act with impunity, legislation is unchanged. Banking/ finance types now know that if they are losing money they must simply lose big enough to trigger more bailouts and the taxpayer pays. This is despotic anti-capitalism: they keep the winnings and losses are generational debt on which they again profit.…
"Austerity stagnates an economy". How did overspending work out for Greece? [ edit: I'd be glad to discuss substance. The admittedly rhetorical question stands. What is the evidence on overspending and growth? ]
So what happened? Greece was effectively used to send 5 trillion (with a "t") in bailout money back to the banks big banks of Europe.
This was possible because of the idiocy that is the Euro and the ECB, which removed exchange risk and devaluation risk from across the European currencies. The banks of Europe did a volume convergence trade, effectively betting against their sovereigns that their new debt would have to be bailed out as they became "too big to fail".
Supposedly one of the bankers involved explained the scam like this:
You borrow at one
You buy at ten
You use the spread
To bury the dead
You bank it at four
And repo more
And then go knock
On the ECB's door
I'm leaving out a lot of details, of course. Anybody intrested in Greece and the EU (and the world economy in general) should watch Mark Blyth's very informative overview of how we got here.
https://www.youtube.com/watch?v=B6vV8_uQmxs#t=673
See this more rent talk for a post-negative-interest-rate update, where Blyth observes that Europe is looking a LOT like Japan did during their "lost decade"...
https://www.youtube.com/watch?v=9fP6YSCpm8g
...and this discussion with the former Minister of Finance of Greece, Yanis Varoufakis.
https://www.youtube.com/watch?v=iMk6aVsl8Rs
> austerity
Austerity is always a terrible solution to economic problems, because just about the stupidest thing you can do when the economy is bad is shrink the GDP. There is even a historical record of austerity (approximately) always leading to a smaller, more stagnant economy... and some nasty political shifts towards populism. The politics of austerity are terrible, because it's effectively a class-specific "put option". We are very good at socializing the risks of investment while blaming the lower classes for "overspending".
Unfortunately a lot of people make the mistake of assuming governments see the economy the same way the people or businesses do. This leads to the idea that government debts are zero-sum like personal debt, but the rules change when you are the group that prints the money and sets economic policy.