Dave Ramsey Trumps John Maynard Keynes

... because if you lived within your means (or less), you wouldn't see stories like this one. Dave says, "Don't borrow." John says, "Go for it!"

April 15 (Bloomberg) -- The worst global financial crisis in 70 years arrived in Saint-Etienne this month, as embedded financial obligations began to blow up.

A bill came due for 1.18 million euros ($1.61 million) owed to Deutsche Bank AG under a contract that initially saved the French city money. The 800-year-old town refused to pay, dodging for now one of 10 derivatives shocks on contracts so speculative no bank will buy them back, said Cedric Grail, the municipal finance director. They would cost about 100 million euros to cancel today, he said.

“It’s a joke that we’re in markets like this,” said Grail, 38, from the 19th-century city hall fronted by an arched facade and the words Liberte, Egalite, Fraternite. “We’re playing the dollar against the Swiss franc until 2042.”

Blame the greedy bankers and the wacky investment tools all you want, but here's the money quote for me.

Under the interest-rate swap deals popular with European municipalities, a bank would agree to cover a locality’s fixed debt payment and the government or agency would pay a variable rate gambling its costs would be lower -- and taking on the risk that they could be many times higher.

‘Hopes of Gain’

The deals were often based on differences between short- and long-term rates or currency movements.

“This is speculating in the hopes of gain,” said Peter Shapiro, managing director at Swap Financial Group LLC, in South Orange, New Jersey, an adviser to companies and governments. “The investor is taking a chance in hopes of a high return. It has nothing to do with hedging.”

Their social spending went way beyond what they produced (because they, those wise Euros, had compassion!) and then they did what any knuckle-dragging moron would do when faced with big debt payments. They went gambling to try to win back the money. Now it's all blowing up on them.

Whoops.