by Bob Chapman, The International Forecaster via MarketOracle.co.uk:
The creation of the euro zone may have given participants one currency, but it created other problems as well. One interest rate was supposed to fit all. Those sovereigns on the financial periphery of the 17 nations found low interest rates too good to be true. As a result, the borrowed funds they shouldn’t have borrowed to finance current debt, was thrown off by the economy. During the 1990s we wrote that one interest rate for all would destroy the euro, but as usual no one wanted to listen. The reason was simple, each nation was and is at a different stage of development and a nation paying 2% rates could now borrow at 4%, which is a giant difference. As debt grew the credit crisis occurred and the rules changed externally. As rates rose sovereigns got into more and more trouble.
European banks were allowed to purchase sovereign bonds leveraged at 40 to one versus their existing capital. Normal prudent leverage is 9 to one. That means any sort of trouble was mega trouble. The result of this is what you are seeing today.
THIS JUST BEFORE THE END OF IT. ICELAND WAS THE 1ST PIECE OF THE DOMINOS.