European banking crisis was mostly private-sector exposure, not sovereign over-spending
Evidence
Again, the vast majority of these exposures were private-sector exposuresâproperty lending in Spain, and the like. The sovereign component of these figures was comparatively small. But what mattered was how levered these banks were and how important those sovereign bonds were for funding these banks. Once these bonds lost value, European banks increasingly found themselves shut out of US wholesale funding markets at the same time that US money markets began dumping their short-term debt. What happened in the United States in 2008, a general âliquidity crunch,â gathered pace in Europe in 2010 and 2011. It was only averted by the LTROs of the ECB in late 2011 and early 2012. â Mark Blyth, Austerity, 240
Categorization
- XREF: Directly feeds the austerity-as-bank-bailout argument that Blyth makes throughout; connects to the 2008 US liquidity crunch parallel he draws. â connects to: The European debt crisis resulted from banking losses, not sovereign overspending â Mark Blyth, Austerity: The History of a DangerousâŠ, 40; The 2008 crisis originated in private-sector practices, not state spending â Mark Blyth, Austerity: The History of a DangerousâŠ, 76; The 2008 crisis was fundamentally private-sector, not state profligacy. â Mark Blyth, Austerity: The History of a DangerousâŠ, 86 (+12 more)
- ADDENDUM: Supports the core thesis that austerity functions to save banks, complementing the sacrifice economics frame in âOn Sacrifice: The Real Kind, with Corpsesâ.
Broader Connections
- States were complicit but did not cause the European debt crisis
#corroborates(0.92) â Mark Blyth, Austerity, 199 - Unregulated banks, not subprime borrowers, drove the global financial crisis.
#qualifies(0.75) â Albert Bandura, Moral Disengagement, 1521 - The housing bubble traces to private securitization, not government GSE lending
#qualifies(0.75) â Philip Mirowski, Never Let a Serious Crisis Go to Waste, 888 - Romer blamed financial crisis on government regulation, not private corruption
#corroborates(0.73) â Philip Mirowski, Never Let a Serious Crisis Go to Waste, 740