How Goldman Sachs Profited from Greece's Debt Crisis
Detroit, Chicago, and Oakland have all suffered from the terms presented by the finance firm.
Recent news reports featured a game of chicken played between the Greek government and the European Central Bank, but an unreported feature of the Greek debt story was the involvement of Goldman Sachs.
In 2001, the American finance firm offered to loan Greece $2.8 billion to cover immediate debts. By 2005, the amount due on the loan had risen to $5.1 billion, according to Robert Reich.
Reich, labor secretary under President Bill Clinton, explains that Greece initially accepted Goldman's terms because the country's ballooning debt was unacceptable by European Union standards.
He claims that Greek debt was caused in the first place by "years of corruption and tax avoidance by its wealthy. But..."
The complex financial tool used to leverage Greek debt, called "cross-currency" or "interest-rate" swaps, was also used by JPMorgan in an agreement with Italy in the 1990s. But so-called swaps have given American public institutions unfavorable terms as well.
The Detroit Water Department had to pay Goldman and other banks penalties totaling $547 million to terminate costly interest-rate swaps.
The Chicago school system ... must pay over $200 million in termination penalties on a Wall Street deal that had Chicago schools paying $36 million a year in interest-rate swaps.
A deal involving interest-rate swaps that Goldman struck with Oakland, California, more than a decade ago has ended up costing the city about $4 million a year, but Goldman has refused to allow Oakland out of the contract unless it ponies up a $16 million termination fee.
Nobody questions the freedom, responsibility, or necessity of entering into binding contracts, but would public entities have knowingly entered into such agreements knowing the potential downfalls?
Apparently not, as Greece refused an overture from Goldman in 2009 that offered another financial instrument that "would push the debt from Greece's healthcare system far into the future."
The moral question is whether private institutions should profit when public institutions make poor financial choices. War profiteers have long been shamed. When will we start to decry debt profiteers?
Here is Reich's documentary film released in 2013:
Here's the science of black holes, from supermassive monsters to ones the size of ping-pong balls.
- There's more than one way to make a black hole, says NASA's Michelle Thaller. They're not always formed from dead stars. For example, there are teeny tiny black holes all around us, the result of high-energy cosmic rays slamming into our atmosphere with enough force to cram matter together so densely that no light can escape.
- CERN is trying to create artificial black holes right now, but don't worry, it's not dangerous. Scientists there are attempting to smash two particles together with such intensity that it creates a black hole that would live for just a millionth of a second.
- Thaller uses a brilliant analogy involving a rubber sheet, a marble, and an elephant to explain why different black holes have varying densities. Watch and learn!
- Bonus fact: If the Earth became a black hole, it would be crushed to the size of a ping-pong ball.
Protected animals are feared to be headed for the black market.
In a breakthrough for nuclear fusion research, scientists at China's Experimental Advanced Superconducting Tokamak (EAST) reactor have produced temperatures necessary for nuclear fusion on Earth.
- The EAST reactor was able to heat hydrogen to temperatures exceeding 100 million degrees Celsius.
- Nuclear fusion could someday provide the planet with a virtually limitless supply of clean energy.
- Still, scientists have many other obstacles to pass before fusion technology becomes a viable energy source.
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