Is Greece the canary in the Euro coal mine?

10 thoughts on ‪#‎greece‬ and ‪#‎grexit‬

  1. If you have no external pressure valve to help with adjustment to differentials in unit labour costs, then the pressure builds up internally – rising unemployment and relatedly rising debts.
  2. The previous boom was due to artificially low ‘one-size-fits-all’ interest rates and not much more. The readjustment in GDP is asymmetric – the downside is much worse. So more debt is raised to prop up the most debt-ridden counties and loans are made to prop up previous loans.
  3. Since when has borrowing (and being forced to borrow) exponentially more debt been a good way to reduce debt?
  4. The Euro is the best example in financial history of the ‘Sunk Cost Fallacy.’ Keep throwing good money after bad, however bad the initial proposition, in this case the Euro.
    We are well beyond the knee, and even the waist, in the ‘Big Muddy.’
    https://en.wikipedia.org/wiki/Escalation_of_commitment
    https://en.wikipedia.org/wiki/Waist_Deep_in_the_Big_Muddy
  5. The Bundesbank made it very clear in the 1990s to anyone who wanted to listen – certainly not Chancellor Kohl who subsequently sat on them – that the best chance for success in a European Monetary Union required a small number of core economies very close in nature and operation to that of Germany. Most European politicians, bureaucrats and economists went along with Kohl and the desire for ‘ever closer union.’
  6. A particularly brave and brilliant economist, Bernard Connolly, who worked for the European Commission was fired in 1995 for disagreeing with the conventional wisdom that the Euro was a good idea. His book ‘The Rotten Heart of Europe’ explained exactly why the euro would be a disaster.
  7. More than 70 countries and territories have quit currency unions since 1945 and yet only a small minority, according to Adam Slater, have then suffered large losses in output. Most of these, such as in the former Yugoslavia, can be explained by other shocks like civil war. http://www.bloomberg.com/news/articles/2015-05-11/the-lessons-for-greece-s-economy-from-70-currency-union-breakups
  8. Perhaps the prospect of Greece leaving the euro frightens European politicians most of all, NOT because of the debt default, but because after the initial shock to the Greek economy (and the short term could be nasty), the country starts to recover quickly. A cheap currency and the best valued assets on the continent could make it an extraordinarily attractive place in which to invest – business and tourism could thrive. How would Italy, Spain and Portugal feel about that?
  9. As I write this, I have just turned over from the news channels to catch an old concert by the Who playing “Won’t Get Fooled Again.””We’ll be fighting in the streets
    With our children at our feet
    And the morals that they worship will be gone
    And the men who spurred us on
    Sit in judgement of all wrong
    They decide and the shotgun sings the song
    I’ll tip my hat to the new constitution
    Take a bow for the new revolution
    Smile and grin at the change all around
    Pick up my guitar and play
    Just like yesterday
    Then I’ll get on my knees and pray
    We don’t get fooled again…”
  10. Greece’s historical contribution to civilisation has been as much, if not more, than most countries. Architecture, democracy (‘people power’), drama, the Hippocratic oath, the Olympics, oratory, theatre, philosophy, Pythagorus – the list goes on. Perhaps she is about to teach us another lesson?