The End of the World as We Know It
CAMBRIDGE Consider the following scenario. After a victory by the left-wing Syriza party, Greeces new government announces that it wants to renegotiate the terms of its agreement with the International Monetary Fund and the European Union. German Chancellor Angela Merkel sticks to her guns and says that Greece must abide by the existing conditions.
Fearing that a financial collapse is imminent, Greek depositors rush for the exit. This time, the European Central Bank refuses to come to the rescue and Greek banks are starved of cash. The Greek government institutes capital controls and is ultimately forced to issue drachmas in order to supply domestic liquidity.
With Greece out of the eurozone, all eyes turn to Spain. Germany and others are at first adamant that they will do whatever it takes to prevent a similar bank run there. The Spanish government announces additional fiscal cuts and structural reforms. Bolstered by funds from the European Stability Mechanism, Spain remains financially afloat for several months.
But the Spanish economy continues to deteriorate and unemployment heads towards 30%. Violent protests against Prime Minister Mariano Rajoys austerity measures lead him to call for a referendum. His government fails to get the necessary support from voters and resigns, throwing the country into full-blown political chaos. Merkel cuts off further support for Spain, saying that hard-working German taxpayers have already done enough. A Spanish bank run, financial crash, and euro exit follow in short order.
more
http://www.project-syndicate.org/commentary/the-end-of-the-world-as-we-know-it
phantom power
(25,966 posts)Bankers said up to 800m (£700m) was leaving major banks daily and retailers said some of the money was being used to buy pasta and canned goods, as fears of returning to the drachma were fanned by rumours that a radical leftist leader may win the election.
Read more: http://www.belfasttelegraph.co.uk/business/business-news/greeks-withdraw-cash-and-stockpile-food-as-fears-rise-16172195.html#ixzz1xmzjaU35
KansDem
(28,498 posts)I take it that means not as quickly as a "bank run."
phantom power
(25,966 posts)1monster
(11,012 posts)system has caused untold damage to much of Europe.
proverbialwisdom
(4,959 posts)'Op-ed articles and commentaries from the world's top economists.' Monthly contributors include Stiglitz, Tyson. Thanks for the link.
COMMENTS
Frank O'Callaghan 14 hours ago
Consider the following scenario. Somewhere in the mass media an idea escapes! It is hunted down to no avail because it has already reproduced.
The description of the idea is simple. It suggests that the way out of our crisis its to change the behaviour that got us here. A clear statement to stop digging when the problem is the hole.
So what was the digging that got us into the hole?
Was it low taxes on the very wealthy? Bank deregulation? Economically illiterate Governments? Corruption? Trade imbalances within a currency? A Democratic deficit? A refusal to allow bondholders to take the consequences of their risks? Stupidity on a grand scale? All of the above? And more.
This idea of asking how we got into the mess is a dangerous one because it demands to be supported with facts. Analysis is also helpful. The 'Apocalypse' or 'End-of-the-world' scenario is entertaining but it does not add to our understanding. Nor does it aid our decisions.
Consider the following scenario. This crisis is fabricated. It can be solved by accountancy. The world is not less wealthy now than it was before the crisis.