"For the time being, Greece can get by because of its excellent debt management, which is why I am confident that Greece is not going to need an immediate bail-out. But given the political economy of the EU, this might turn out to be a disadvantage. Europe’s complacent leaders will only step in if a crisis is both imminent and visible. The really treacherous aspect about the Greek crisis is that the country’s liquidity position is better than its solvency position. Insolvency is a gradual, invisible process. The negative effects of debt-deflation dynamics have not yet begun, but will become inevitable as the Greek public and private sectors go through a simultaneous debt reduction process. In such an environment my assumption of a 2 per cent rate of nominal growth might be far too optimistic. And even with such an unrealistically optimistic assumption, default would be hard to avoid.
There have only ever been two intellectually honest views about economic and monetary union. The first is that it could not work, as it would eventually produce a situation in which a country’s national interest conflicts with the interest of the monetary union at large. The second is that it could work, but only for as long as member states are ready to co-ordinate economic policy in the short run, and move towards a minimally sufficient fiscal union in the long run. The message from the EU, and from Germany in particular, is that the latter has now been ruled out."
You say you want to seek the truth, but it's hard to find
"One thing Chait doesn’t mention, though, is that the willingness of right-wingers to believe this particular myth has a lot to do with projection. On the right, people are for smaller government as a matter of principle — smaller government for its own sake. And so they naturally imagine that their opponents must be their mirror image, wanting bigger government as a goal in itself.
But it’s not true. I don’t know any progressives who gloat over increases in the federal payroll or the government share of GDP. Progressives have things they want the government to do — like guaranteeing health care. Size per se doesn’t matter. But people on the right apparently can’t get that."
|by Percy Bysshe Shelley|