About two years ago, I decided to limit the amount of policy advocacy I do around here and to focus mostly on forecasting. As I usually put it, I like write about what will happen and what policy makers will do rather than about what should happen and what policy makers should do. There are a lot of reasons for taking this tack but the chief one amongst them is that in times of crisis we as investors, business people and citizens care a lot more about the ‘will’ than the ‘should’.
But @yanisvaroufakis‘s post on the Grexit below tells you that Greece’s leaving would be catastrophic, a Grexit is a definite SHOULD NOT. I have a hard time finessing this one because I believe Greece’s situation in the euro zone is untenable economically and politically but that breaking up the euro zone will crystallize worst case outcomes for which we are not prepared.
I gotta tell you you. I am getting pretty sick of talking about Greece and the euro zone. But the reality is that this is the defining issue of the global economy right now. So I am forced to spend a lot of time on it here. The issue at hand is the how and why of Greece’s leaving the euro zone, the so-called Grexit.
Let’s be honest. I am a eurosceptic. If it were me making policy, I never would have formed the euro because I believe currency sovereignty is important. But now that we are here, breaking up in the middle of a debt crisis is not a good option. The right thing to do would be to see the euro zone through this via some ECB backstops balanced by some sovereign defaults and some bank recapitalisation balanced by some bank resolution and creditor haircuts. Afterwards, when growth was better, gauging the political will for further integration to support a single integration would decide who would leave the euro zone and how to break the euro apart. Greece should definitely leave at that point.
I know this is not the politically expedient choice. And I also know that this isn’t the way human psychology works. You need a crisis to break through institutional inertia. And we’re getting that!
So I present you the latest flood of news and try to interpret what it means in the context of the political and economic constraints.
Anyway, that’s my piece. Here are the links.
Greece
Greek Depositors Withdrew $898 Million From Banks Monday – WSJ.com
FT Alphaville » Plug-pulling in Athens
Cost of Greek exit from euro put at $1tn | Business | The Guardian
EZB lässt einige griechische Banken fallen – Griechenland in der Krise – derStandard.at › Wirtschaft
Weisbrot and Krugman are Wrong: Greece cannot pull off an Argentina « Yanis Varoufakis
Goodbye Euro, Welcome Back Drachma | Debate Club | US News Opinion
Leaving the Euro May Be Better Than the Alternative – NYTimes.com
FT Alphaville » Greece: when the lights go out
Grecia, peor que EEUU durante la Gran Depresión: la bolsa ha retrocedido 20 años – elEconomista.es
Schaeuble Says If Greeks Had Own Currency It Would Devalue – Bloomberg
Greece’s exit may become the euro’s envy – FT.com
European Officials Warn Greece – WSJ.com
Spain
Europa lockert Sparauflagen für Spanien – SPIEGEL ONLINE
El riesgo de España, en máximos de la historia del euro: 477 puntos – Cotizalia.com
JPMorgan
JP Morgan, TBTF and ZIRP: James Saft – CNBC
Moody’s Said to Delay Bank Downgrades Amid Crisis, JPMorgan Loss – Bloomberg
Argentina
Repsol sues Argentina over giant YPF seizure | Reuters
Argentina: pressure mounts on the peso | beyondbrics | FT.com
Exclusive: Brazil targets Argentina with new import license | Reuters
China
EconoMonitor : EconoMonitor » China Real Estate Unravels
EconoMonitor : EconoMonitor » China Real Estate Unravels
Sober Look: To see China’s slowdown in "real time", just watch their interest rates
Elsewhere
78-Year-Old Woman Forced To Leave House She & Her Husband Built In 1956 – The Consumerist
FT Alphaville » Tis an ugly morning in euroland
Fears of US farmland bubble echo history – FT.com
GM to drop Facebook ads due to low consumer impact | Reuters
Hanging out with Jimi Hendrix, 1964-1970 | Retronaut
German economy roars ahead in first quarter | Reuters
The IRA | It’s All About the Fraud: Madoff, MF Global & Antonin Scalia | ZeroHedge
Investors it’s time to face the truth- MSN Money
Yields on UK government bonds drop to record low at 1.87% | Business | The Guardian
North Dakota oil boom: thousands pin their dreams on striking it rich | Environment | guardian.co.uk
BBC News – Italian banks have credit ratings cut by Moody’s
BBC News – India inflation rate rises faster than expected
BBC News – Eurozone industrial production falls back in March
The Apple-Intel-Samsung ménage à trois | Monday Note | Technology | guardian.co.uk