Daily Commentary: On policy advocacy and forecasting in Greece’s exit from the euro zone

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

EU-Bericht: Illegale Einwanderer haben in Griechenland leichtes Spiel – International – Politik – Handelsblatt

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

German voters must break the Merkel mindset that got them into this | Robin Wells | Comment is free | guardian.co.uk

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

BBVA dice que las tensiones financieras son peores que tras la quiebra de Lehman | Economía | EL PAÍS

JPMorgan

Jamie Dimon’s $2 Billion Mistake: The JP Morgan Chase fiasco, and how to fix Wall Street. – Slate Magazine

JP Morgan, TBTF and ZIRP: James Saft – CNBC

“What Scares Me Isn’t $2 Billion Loss JP Morgan Made, What Scares Me is the Record $19 Billion in Profits” « naked capitalism

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

EuropeEuropean breakupfinancial newsGreece