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Catch-22 Crisis: The Toxic Trace – Part 3 of 5

This article follows on from Part 2: The Grand Plan

When movies like Catch-22 start making sense on more than one levels, it’s time to wake up and take the antidote…

The theme of this episode is Toxicity…

Toxicity is pretty much everywhere these days, from ocean seafood to bank assets. Yeah, we thought we’d had our hands full with pollution, and then the financial crisis hit, and we got to experience the new stinky items of the day: toxic banks and toxic assets.

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That was back in 2008, when the world almost collapsed. It didn’t, and we came back from the brink, saved at the nick of time by the controversial bailouts exercised by the US government and the gradual recapitalization of banks and the US economy at large, which prevented the world economy from a domino effect.

Only we didn’t come back, not all the way. The money loaned to the banks was not loaned out to individuals and small businesses in turn i.e. the favor didn’t trickle down, as it was supposed to, at least not to the extent the agreements had stipulated. Instead, institutions too big to fail – saved so that the rest of the world wouldn’t go down with them, at the price of making them even bigger – kept the money for themselves to rebalance their sheets, at the expense of the individual investor and taxpayer who, ironically enough, was given a handkerchief instead of a parachute.

Then came the European sovereign debt crisis, and with it the toxic nations. First Greece, followed by Ireland and Portugal, all of them riddled with unmanageable debt and growing deficits that had to be dealt with ASAP to prevent their toxicity from spreading to bigger and more important players, such as Spain and Italy, even France. The leaders of Europe came together to find lasting solutions to the crisis and reverse the damage, restoring health to the economy and its people.

So far, not so good. Differences between key players prevent any form of decisive action from taking place, and the markets are reeling as a result, waiting for action, and so are investors. So are citizens around Europe, and the world in general. Failure to deal with the problem is liable spread to adjacent countries and economies, affecting everyone. This is a disorder that moves like wildfire, and which everyone wants extinguished.

Ideas how to do this have been floated. In theory, contamination will be prevented if bad debt is isolated from the rest of the world with firewalls, then backed and reinforced with rescue funds that prevent the need for a rescue in the first place. See, with a safety net in place and the risk of total default averted, investors won’t flee from the area and economic stability will return. That done, with debt contained and sealed, and balance somewhat restored, attention can shift to fixing the entire financial bedrock. World leaders, economics experts, and big corporations will have breathing space, the time and resources to find a way to deal with the underlying problems by eliminating bad practices rather than selling them to the next highest bidder. (Recycling toxicity can only bring further toxicity, which is hardly what trade and enterprise are about.)

Here’s how the toxic trace is kept in our system. You be the judge whether this is satire or reality…

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