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By David Rothkopf
Published: June 14 2010 00:28 | Last updated: June 14 2010 00:28
Back when most of us were in school, we learnt that one of the basic tools available for assessing the health of a business or a government was its balance sheet. It was a logical idea. Tally up the assets, do the same for the liabilities and do the math. You could understand whether the company was viable or whether the government was overburdened with risk.
Later, as we grew more sophisticated, we learnt that the balance sheet did not tell all. Thanks to financial "innovators", a new category of risks was accumulating "off" balance sheet. These risks "“ such as some of the derivatives deals that banks structured for Greece so it could "borrow" without impacting indicators of fiscal health such as its debt-to-GDP ratios "“ required analysts to do more detective work and were essentially opaque to average investors.
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