Thursday, July 9, 2015

What next?

Source: Deutsche Bank Research 

The lovely flow chart comes from Deutsche Bank Research

It emphasizes the central point I am taking from all this -- how Greek banks are hostages in this negotiation. With banks closed and capital controls, the Greek economy can't function.


  1. They might also be placed on "double secret probation" i.e. derogation, which would kick them out of the euro with the convenient publicized fantasy that someday they'd be allowed back in. Everyone could pretend it's just a temporary separation and not a real divorce.

  2. Like many others, I cannot imagine Greece prospering under the ECB, which is making monetary policy for Northern Europe, in addition to Southern Europe.

    The Greece economy boomed up to 2008 that is true, but only because it was borrowing and spending. Money poured into Greece. A type of fiscal stimulus.

    Now, Greece must renege on debts and needs its own central ban, and to print drachmas to the moon.

    Greece needs a pro-market economy too.

    But, tough question: In a democracy, in a recession or depression, have voters ever pulled the lever for capitalism or free enterprise?

    I sense voters like free enterprise and capitalism when there are very tight labor markets and lots of sniveling and whining about labor shortages.

    Seems to me the goal in the UU and Greece should be a monetary policy that shoots for very tight labor markets, thus encouraging the population to have faith in capitalism and free markets. How would lefties whimper for more welfare when labor markets are chronically tight?

    I do not think central banks can suffocate economies and populations into reducing structural impediments and embracing free markets.

    The ECB, IMF just tried that in Greece, and the voters responded with a vote for statism. Big surprise.

  3. Agree about the banks. It would be more accurate to say that the question is whether Greece will re-enter the euro system or stay out of it. Because they aren't in it now.


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