Let Greece Fail
Yes. Fail. Default. Whatever.
The subject is a tad complex and I'm not going to rehash the intricacies here, but if you are reading this, you probably already know a thing or two about global finance and/or central banking. The key point is this: Greece is the tip of the iceberg. The debt crisis will balloon out of control if monetary authorities don't hold fiscal actors to account. The bond market too. The bond market must make it so that these political chumps don't take perpetual debt rolling as a given. If allowed to stand there at the edge of abyss by the EU central banking authorities and the bond market, the politicians will have to wake up. Greece is the perfect test case to send this message too. It's puny. It'll be a mere bump in the road. Italy and Spain will be much bigger trouble if we travel down this road with them. California too. If Greece and Portugal can cause this kind of a headache, what is gonna happen when California hits the wall? Better to send the signal that sovereign borrowers are on their own and have to figure their own problems out with Greece now than with somebody bigger later. Greece is the perfect sacrificial lamb. This is very akin to Bear Stearns and Lehman. If we had just let Bear fail, perhaps Dick Fuld & Co. would have got the message and had time to get financial religion.
Closer to home, I think this gets it right. Personally I welcome our new double AA future.
UPDATE: Dan Mitchell agrees.
The subject is a tad complex and I'm not going to rehash the intricacies here, but if you are reading this, you probably already know a thing or two about global finance and/or central banking. The key point is this: Greece is the tip of the iceberg. The debt crisis will balloon out of control if monetary authorities don't hold fiscal actors to account. The bond market too. The bond market must make it so that these political chumps don't take perpetual debt rolling as a given. If allowed to stand there at the edge of abyss by the EU central banking authorities and the bond market, the politicians will have to wake up. Greece is the perfect test case to send this message too. It's puny. It'll be a mere bump in the road. Italy and Spain will be much bigger trouble if we travel down this road with them. California too. If Greece and Portugal can cause this kind of a headache, what is gonna happen when California hits the wall? Better to send the signal that sovereign borrowers are on their own and have to figure their own problems out with Greece now than with somebody bigger later. Greece is the perfect sacrificial lamb. This is very akin to Bear Stearns and Lehman. If we had just let Bear fail, perhaps Dick Fuld & Co. would have got the message and had time to get financial religion.
Closer to home, I think this gets it right. Personally I welcome our new double AA future.
UPDATE: Dan Mitchell agrees.
posted by Donny Baseball at 11:43 AM
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