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Global Crisis/Innovation Blog

The Euro Crisis for the Fifth Grade

 By Shlomo Maital

  In Europe, the answer is definitely, No!     


Are you smarter than a fifth grader?  This is the name of a popular US TV show, that matches adults’ knowledge against that of kids.  More often than not, the kids win.  Today, in Europe,  we can ask the leaders of Europe –  European Central Bank, the leaders of France and Germany, and others – whether they are as smart as fifth grader.  The answer is a resounding no!      

      Here is my effort to explain the current euro crisis to fifth graders.    If you’re i12 years old, n fifth grade and want to rescue the euro (and the world) from spineless scoundrels, please, contact me.   If you cannot explain something well enough so a 12-year-old can understand it, you probably don’t understand it well enough yourself.

       Every country has its own kind of money. Europe’s money is called the ‘euro’.  A lot of people are worried about the euro.  Here is why.  Some countries in Europe are in trouble.  This is because a country, even though it is big, is just like you and me. When you spend more than your weekly allowance, sometimes you can borrow from your mom or dad. But then you owe money. Because they keep track. And next week, when you get your allowance, you have to pay back what you owe. That leaves you with a lot less money for movies or treats. Sometimes you might not have ANY money that week. That is real trouble.  Countries, too, borrow money. Then they have to pay it back.  To pay back what they owe, they often borrow more.  But, what if nobody wants to lend them money?  Like, what if your mom and dad refused to lend you money against next week’s allowance? Countries can’t get along without borrowing money. In Europe, countries like Ireland, Portugal, Italy, Spain and now Greece have borrowed too much.  Some of what they owe has to be paid back soon. To pay it back, because they have no money, they have to borrow more. But what if nobody will lend to them? What if people are afraid that if they lend to them, they won’t get their money back?  What if there are rumors that these countries are broke and can’t pay back what they owe?  The rumors themselves worsen the problem, because they make it even harder for countries to borrow.  When you borrow too much, your mom and dad say, hey, get real.  Stop wasting money.  When countries borrow too much, they have to say to themselves, too,   hey, get real – stop spending and borrowing so much.  But this is really hard.  Nobody likes to hear those words, and sometimes the country’s leaders don’t want to say them, because people get mad and don’t vote for them.  So in Europe some countries have to go to their ‘mom and dad’ (the bigger countries in Europe that do have lots and lots of money, like Germany and France) and ask for emergency help.  Like mom and dad, the rich countries in Europe say, sure, but first, get real! Cut your spending!  And then the people of these countries in trouble get real upset, because they can’t buy all the great stuff they used to buy, with the borrowing.  Now, your mom and dad can tell you what to do, more or less. But in Europe, the rich countries don’t seem to be very good at telling the countries in trouble what to do.  Just like you may say to your mom and dad, come on folks, you have oodles of money, why don’t you give me some of it?  — so  these poor countries in Europe say, hey, rich countries, help me out!  Just forget I owe you all that money, or at least some of it.  And the rich countries say,  uh uh!  No way!  If we do that, you’ll never change, you’ll never learn to handle money properly – just like your mom and dad.  Grow up!  So that’s where things stand. And the real problem is, nobody seems to have enough brains, like a fifth-grader, to realize that the problem has to be solved once and for all, it cannot go on like this.  Neither the rich countries (the moms and dads), nor the poor countries (the fifth-graders who borrowed too much against their allowances) seem very good at discussing things and reaching a deal that is fair for both sides.   Maybe we should send some real fifth-graders to knock sense into both sides.  They can’t do any worse than the bunglers who are running things today.


Blog entries written by Prof. Shlomo Maital

Shlomo Maital
July 2011
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