Post Tagged with: "government debt"

A parallel currency for Greece: Part II

A parallel currency for Greece: Part II

Introducing a currency in parallel to the euro could help Greece repay its external debt and resume economic activity. This second column in a two-part series evaluates the different options and their effects on aggregate demand and fiscal sustainability. The authors propose a tax credit certificates programme, which they argue could generate new spending capacity and avoid the adoption of new austerity measures.

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A parallel currency for Greece: Part I

To prevent it from defaulting on its debt, the Greek government might need to introduce a new domestic currency, in parallel to the euro. This column, the first in a two-part series, compares the current proposals for a parallel currency and discusses how such a policy instrument could promote economic recovery.

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Is Greece’s Debt Odious?

There is a legal concept called “odious debts.” It can be traced back more than a century. The US helped create a precedent for it by denying Cuba’s responsibility for the debt incurred under Spanish colonial rule. The concept took on added significance in the post-colonial era more broadly. The issue here is the continuity of legal obligations from one regime to another especially as it pertains to the debt acquired.

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Syriza and the French indemnity of 1871-73

Syriza and the French indemnity of 1871-73

The euro crisis is a crisis of Europe, not of European countries. It is not a conflict between Germany and Spain (and I use these two countries to represent every European country on one side or the other of the boom) about who should be deemed irresponsible, and so should absorb the enormous costs of nearly a decade of mismanagement. There was plenty of irresponsible behavior in every country, and it is absurd to think that if German and Spanish banks were pouring nearly unlimited amounts of money into countries at extremely low or even negative real interest rates, especially once these initial inflows had set off stock market and real estate booms, that there was any chance that these countries would not respond in the way every country in history, including Germany in the 1870s and in the 1920s, had responded under similar conditions.

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The German view of the Euro crisis

This is an abbreviated version of a post first published at Credit Writedowns Pro on 15 Oct. The Germans got into the eurozone out of a desire to increase European integration and to strengthen Europe as an economic area that rivalled the United States. Yet, now we are in a period where the Germans are being blamed for everything that’s […]

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Some things to consider if Spain leaves the Euro

Some things to consider if Spain leaves the Euro

By Michael Pettis It might seem almost churlish to wonder what would happen if Spain were to leave the euro. The official European position is that the battle of the euro has been pretty much won, and anyone who argues otherwise will be accused of being a euro hater, an Anglo-Saxon or, even worse, a writer for theFinancial Times. But […]

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Russia: Economic Vulnerabilities

Russia: Economic Vulnerabilities

By Marc Chandler There is a common perception that Russia move on Crimea shows its strength. A closer examination suggests it is more complicated that it may seem. Like the bully at the school yard, the aggressiveness conceals weaknesses. Simply put, Russia felt threatened and for good reason. The democratic coup in the Ukraine threatened a potentially strategic loss for […]

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The growing mess which will be left behind by the Abenomics experiment

The growing mess which will be left behind by the Abenomics experiment

Japan’s deflation problem is overdetermined – there are multiple causes at work, any one of which could account for the observed phenomenon. Those who have been following the debate can simply choose their favourite – balance sheet recession, liquidity trap, fertility trap – each one, taken alone, could be sufficient as a cause. But I would here like to use the term “overdetermination” in another, less technical, sense, since it seems to me Japan’s problem set is overdetermined in that we always seem to be facing at least one more problem than we have remedies at hand.

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Argentina – From Bad to Worse

Argentina – From Bad to Worse

We appear to be on the cusp of a more serious crisis in Argentina, as things are moving from bad to worse. Spot ARS has dropped as much as 20% earlier today, while the implied “blue chip” FX rate has fallen nearly 10% over the past two days. The central bank does not appear to be intervening by selling dollars, […]

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More Thoughts on the European Endgame

More Thoughts on the European Endgame

My view remains that Europe is in an incipient but unstable recovery vulnerable to exogenous shocks. However, I do not believe this recovery means that crisis is over. Rather, this is a lull before continued stagnation forces Europe to make hard policy choices about who actually remains in the euro over the long-term.

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The legacy of government debt in Europe bodes ill for growth

The legacy of government debt in Europe bodes ill for growth

This column argues that the legacy of public debt resulting from the crisis in the Eurozone is a serious threat. Both the size of the problem and the options to address it make life much more difficult for policymakers than was the case in the late 1930s after the collapse of the gold standard. For some countries, a ‘subservient’ central bank might be preferable to the ECB.

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The perils of private sector deleveraging in the Eurozone

The perils of private sector deleveraging in the Eurozone

Private and public debt in the Eurozone increased since the 2000s, and especially so in certain countries. This column presents evidence that high levels of private and public debt, together with deleveraging of all sectors, are especially harmful for economic growth. Private sector debt is more detrimental to growth than public sector debt. Therefore, policies aimed at reducing the private debt could yield important benefits.

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