I recommend the Sober Look blog. If you want something scary, go here. The short version is that the European Central Bank has completely lost control of the Greek money supply. It can print euros and buy loads of Greek assets, but all the liquidity drains right out of the country. Basically, nobody wants to hold deposits in Greece. On the flip side, nobody outside Greece wants to lend to a Greek company. In the words of a commentor, “The Greece analogy to a state in the U.S. no longer applies.”
A while ago, Doug Muir and I had a debate about Eurozone exit. We agreed that if the banking system collapsed and capital flight went out of control, then the costs of exit would no longer apply ... because the bad effects of exit would have already happened. The implication of a collapse in the Greek money supply is that absent more fiscal help from the rest of the Eurozone, there is no longer any reason for Greece to stay in.
Other than, of course, warm and charitable Greek feelings towards the rest of the Eurozone.
"Other than, of course, warm and charitable Greek feelings towards the rest of the Eurozone."
Ha!
Posted by: Bernard Guerrero | April 16, 2012 at 05:13 PM
What of Italy?
Italy shifts priority from austerity to growth:
http://news.yahoo.com/italy-shifts-priority-austerity-growth-144834094--business.html
That makes me nervous a bit.
Posted by: Will Baird | April 18, 2012 at 05:52 PM
Actually, it's the reverse. You should take heart from this. Seriously. Ask Carlos why.
Posted by: Noel Maurer | April 18, 2012 at 11:34 PM