Dear Eurozone Officials, Mr Putin Is Waiting
The FT has a remarkable story today close how Eurozone officials are worried close Greece. To quote:
This is sort of amazing. There is an one-time adage - which is that if yous owe someone $100 yous have got a problem. If yous owe someone a $100,000,000,000 they have got a problem.
Greece's debt (and thence the German/Eurozone problem) is somewhat larger than that.
Moreover Hellenic Republic runs a primary budget surplus. The simply argue the Greek regime needs coin (ever) is to curl existing debt.
If they default on existing debt that work goes away.
Paul Krugman summarised the work alongside devastating clarity.
Bluntly he points out the Troika (and the higher upwards worried Eurozone officials) can't wound the Greek Government past times denying incremental finance because the Greek Government does non postulate incremental finance.
--
Krugman does withal quest out that the Greek banks require finance. As Krugman puts it:
How close this for a negotiating position... nosotros volition overstep a police pull to arrive illegal for whatsoever Greek banking enterprise to repay the ECB. Period.
Then have got a ane calendar week banking holiday, re-denominate all remaining Greek banking enterprise assets as well as liabilities inward Drachma, as well as if a default resultant passes whatsoever courtroom nosotros volition nationalise the Greek banks as-per-Washington Mutual - leaving the obligations inward some stripped-down musical rhythm out from which at that spot is nix to collect.
Finally, inward this environment, depositors volition have shares inward the novel Greek banks inward proportion to their deposits. Those shares volition last worth a lot because an obscene amount of banking enterprise liabilities volition last wiped out.
--
This volition crash the Greek economy? You brand me laugh. We are already at Great Depression levels as well as removing the burden of your giddy debt schedules volition last incredibly stimulative.
Sure nosotros volition lose access to clearing but Vladimir Putin is lending us a few billion dollars as well as nosotros have got a clearing scheme inward Singapore. [They volition practise this for anyone from Libyan dictators down...]
Moreover I was in ane lawsuit told past times Capital One - a respected United States credit bill of fare companionship - that late bankrupted people brand the best credits.* After all their past times debts have got been cancelled as well as they are past times Definition solvent. It won't have got ii years as well as the fiscal markets volition last happy to lend to us again.
--
Finally nosotros are non a wildly interconnected economy. Its non similar Finmeccanica - the Italian companionship which makes components for Boeing Dreamliners as well as thus needs the global fiscal as well as payments scheme to function. We practise unproblematic stuff, sell olive crude oil as well as feta cheese as well as lots of tourism services.
It won't have got long but nosotros hold back our beaches to last overrun alongside fatty oft drunkard German linguistic communication tourists. And nosotros sort of similar it that way. The fatter the better. At nosotros volition sell them Retsina. It volition last inexpensive as well as they powerfulness acquire to similar it. You Germans similar to drink, don't you.
--
So what practise I want?
Enough coin that I am allowed to run primary deficits. Fairly large ones. 1.5 per centum of gross domestic product would last overnice but I volition settle for 1 percent. And of class yous know nosotros are never going to repay it.
I don't attention how yous practise this. You tin flame practise it every bit a straight subsidy, yous tin flame practise it whatsoever manner yous like. But every bit nosotros are non going to repay it as well as then at some phase yous are going to suck it up. For political purposes yous likely desire to clothes it inward some "equalisation scheme" as well as then it is less obvious what yous are doing. But that is your problem. You know what I want.
I am off to the hotel to read a little. Just boot back. Lord's Day black I have got a flying booked to Moscow but I powerfulness acquire early. I listen the girls are hot there.
And likewise Mr Putin is waiting.
Alexis...
*On a personal degree I was genuinely told that past times a Capital One senior staffer.
" the fears of eurozone officials that the Greek regime was unaware of the precariousness of its fiscal situation"
This is sort of amazing. There is an one-time adage - which is that if yous owe someone $100 yous have got a problem. If yous owe someone a $100,000,000,000 they have got a problem.
Greece's debt (and thence the German/Eurozone problem) is somewhat larger than that.
Moreover Hellenic Republic runs a primary budget surplus. The simply argue the Greek regime needs coin (ever) is to curl existing debt.
If they default on existing debt that work goes away.
Paul Krugman summarised the work alongside devastating clarity.
Bluntly he points out the Troika (and the higher upwards worried Eurozone officials) can't wound the Greek Government past times denying incremental finance because the Greek Government does non postulate incremental finance.
--
Krugman does withal quest out that the Greek banks require finance. As Krugman puts it:
"the powerfulness of the creditors over Hellenic Republic comes via the powerfulness to crash the Greek banking system, which is heavily subject on the powerfulness to borrow at postulate from the ECB. Cut off that support, as well as Hellenic Republic suffers banking collapse. So yes, the creditors have got a large social club they tin flame utilisation on a recalcitrant Greece."But Krugman overstates that club. It is exclusively inside Alexis Tsipras's powerfulness to default to the ECB too. Indeed the blueprint for regime defaults is to simultaneously strength a individual sector default.
How close this for a negotiating position... nosotros volition overstep a police pull to arrive illegal for whatsoever Greek banking enterprise to repay the ECB. Period.
Then have got a ane calendar week banking holiday, re-denominate all remaining Greek banking enterprise assets as well as liabilities inward Drachma, as well as if a default resultant passes whatsoever courtroom nosotros volition nationalise the Greek banks as-per-Washington Mutual - leaving the obligations inward some stripped-down musical rhythm out from which at that spot is nix to collect.
Finally, inward this environment, depositors volition have shares inward the novel Greek banks inward proportion to their deposits. Those shares volition last worth a lot because an obscene amount of banking enterprise liabilities volition last wiped out.
--
This volition crash the Greek economy? You brand me laugh. We are already at Great Depression levels as well as removing the burden of your giddy debt schedules volition last incredibly stimulative.
Sure nosotros volition lose access to clearing but Vladimir Putin is lending us a few billion dollars as well as nosotros have got a clearing scheme inward Singapore. [They volition practise this for anyone from Libyan dictators down...]
Moreover I was in ane lawsuit told past times Capital One - a respected United States credit bill of fare companionship - that late bankrupted people brand the best credits.* After all their past times debts have got been cancelled as well as they are past times Definition solvent. It won't have got ii years as well as the fiscal markets volition last happy to lend to us again.
--
Finally nosotros are non a wildly interconnected economy. Its non similar Finmeccanica - the Italian companionship which makes components for Boeing Dreamliners as well as thus needs the global fiscal as well as payments scheme to function. We practise unproblematic stuff, sell olive crude oil as well as feta cheese as well as lots of tourism services.
It won't have got long but nosotros hold back our beaches to last overrun alongside fatty oft drunkard German linguistic communication tourists. And nosotros sort of similar it that way. The fatter the better. At nosotros volition sell them Retsina. It volition last inexpensive as well as they powerfulness acquire to similar it. You Germans similar to drink, don't you.
--
So what practise I want?
Enough coin that I am allowed to run primary deficits. Fairly large ones. 1.5 per centum of gross domestic product would last overnice but I volition settle for 1 percent. And of class yous know nosotros are never going to repay it.
I don't attention how yous practise this. You tin flame practise it every bit a straight subsidy, yous tin flame practise it whatsoever manner yous like. But every bit nosotros are non going to repay it as well as then at some phase yous are going to suck it up. For political purposes yous likely desire to clothes it inward some "equalisation scheme" as well as then it is less obvious what yous are doing. But that is your problem. You know what I want.
I am off to the hotel to read a little. Just boot back. Lord's Day black I have got a flying booked to Moscow but I powerfulness acquire early. I listen the girls are hot there.
And likewise Mr Putin is waiting.
Alexis...
*On a personal degree I was genuinely told that past times a Capital One senior staffer.
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