This is the best description of the way the European bailouts work I have seen yet:
It is a slow day in a little Greek Village. The rain is beating down and the streets are deserted.Times are tough, everybody is in debt, and everybody lives on credit.On this particular day, a rich German tourist is driving through thevillage, stops at the local hotel and lays a €100 note on the desk,telling the hotel owner he wants to inspect the rooms upstairs in order topick one to spend the night.The owner gives him some keys and, as soon as the visitor has walkedupstairs, the hotelier grabs the €100 note and runs next door to pay hisdebt to the butcher.The butcher takes the €100 note and runs down the street to repay his debtto the pig farmer.The pig farmer takes the €100 note and heads off to pay his bill at thesupplier of feed and fuel.The guy at the Farmers' Co-op takes the €100 note and runs to pay hisdrinks bill at the taverna.The publican slips the money along to the local prostitute drinking at thebar, who has also been facing hard times and has had to offer him"services" on credit.The hooker then rushes to the hotel and pays off her room bill to thehotel owner with the €100 note.The hotel proprietor then places the €100 note back on the counter so therich traveler will not suspect anything.At that moment the traveler comes down the stairs, picks up the €100note, states that the rooms are not satisfactory, pockets the money, andleaves town.No one produced anything.No one earned anything.However, the whole village is now out of debt and looking to the futurewith a lot more optimism.And that, Ladies and Gentlemen, is how the EU bailout package works
It was found in the comments here: The Terrible End of Europe's Nanny State
I say let Europe rot in their debt and America too. It's the only way to get things straightened out. You can't build a new building until you tear down the old foundation. It's painful, but necessary.
Europe and Ameirica are both just playing shell games with their debt. Eventually it is going to come back and haunt us. The question is how bad is the eventual correction going to be. I would guess that the last 3 years were just a foretaste and the worst is yet to come because the politicians on both sides of the Atlantic have failed to seriously address the underlying structural problems in the Western financial model.
Is it the bankers or the folks that buy the debt from the Central Bankers? I tend to think it is the latter, plenty of investors other than banks buy sovereign debt.