While Greece suffers to the point of revolution and suicide, hedge funds made out like bandits on Greek sovereign debt.

Greece had reached its target of buying back enough bonds at a discount to retire 21 billion euros, or about $27 billion, of its debt. The bigger winners, though, were hedge funds, which pocketed higher profits than many had expected, in yet another Greek bailout financed by European taxpayers.

To some experts, this latest chapter in the long-running Greek drama is another reminder of how private investors have managed to outmaneuver European officials at various stages of the debt crisis. And they caution that each time it happens, future debt workouts in the euro zone will become even more costly.

When Europe wanted to give the Greek bond holders a hair cut, the hedge funds threatened collective action against a host of European countries. They wouldn't buy any European sovereign bonds in retaliation against the Eurogroup taking a hard line against them.

The warning was blunt: If Athens set off legal mechanisms in the bond contracts known as collective action clauses, forcing bondholders to accept lower prices, investors would stop buying the bonds of struggling European countries. That would be bad news for Spain and Italy — to say nothing of Portugal and Ireland when they return to global bond markets in 2013.

The planets are aligning for another round of debt monetization in Europe, backed up by the United States. Mario Draghi, the president of the European Central Bank, is reportedly looking at expanding the amount of Spanish government debt he can buy. He is also said to be considering another LTRO – Long Term Refinancing Operation, which is the mechanism the central bank uses to buy debt from private sector banks.

That Spain needs help is beyond doubt. The global bond market has been fleeing Spanish government debt as rapidly as it can, forcing yields to the 7.3% area, which is beyond the point where the Spanish government can continue to pay interest from its own revenues without severely cutting back on domestic expenditures. The same situation is playing out at the local level in Spain: Andalusia and other provinces have been besieging Madrid for help in meeting the interest burden on their own debts. There is also talk that medium to small size Spanish commercial banks are out of liquid collateral, and are unable to meet further collateral calls on the global markets.

With Spain now getting a bail out all to pump up their insolvent banks, one might wonder how did we get here in the first place?

We actually are on the precipice, with a key critical Geek vote on whether or not they will default on their international bail out. Sitting on the edge of a cliff, a review of the European sovereign debt crisis and how we got here is at hand.

What the hell happened is complicated. Greece is not the same as Ireland, nor is Spain the same as Greece. Ireland's sovereign debt crisis was the direct result of their financial crisis. Greece, on the other hand, had long standing structural problems with their economy. Nor are their economies the same although treating them as such originally was part of the problem.

The St. Louis Federal Reserve Research Director Christopher Waller gave a presentation on the the European Debt Crisis. The entire May 8th, 2012 lecture is below. The focus is on debt to GDP ratios, the European Union and interest rates for sovereign bonds. We learn about the European Union's major financial structural problems versus how exactly the debt happened. There are plenty of specifics and this lecture is concise, accurate in it's scope. If you don't understand European Sovereign Debt fundamentals, watch this lecture in full and you will.