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Looks like another trial balloon.

Might mean German CDS gets hit.

All the national govs are subject to liquidity risk.

Just like the US States

Except the eurozone debt ratios are over 10 times worse.

If the world economy is improving at a fast enough rate all they probably need to do is buy some time.

No visibility on how this gets resolved.

Germany is considering a plan with its European Union partners to offer Greece and other troubled euro zone members loan guarantees in an effort to calm market fears of a default, according to people familiar with the matter.

The proposed plan would be done within the EU framework but led by Germany. German Finance Minister Wolfgang Schaeuble has discussed the idea in recent days with European Central Bank President Jean-Claude Trichet. Greece is the hardest hit of several countries, including Spain, Portugal and Ireland, that have recently seen their bonds come under pressure amid concerns that they will have difficulty repaying their debts.


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5 Responses

  1. Are you more comfortable with maintaining the monetary union and working things out through the EU partners, or with seeing the restoration of monetary sovereignty for all countries so that we try somewhat coordinated national monetary policy actions on a broad scale?

    If the Greek sovereign began issuing its own currency as an Employer of Last Resort, and provided that money through the deficit-spending method outlined in MMT theory, would that government of Greece be creating that new money without issuing debts?
    If not, from whom would the Greek government be borrowing the monies?

    Thanks

  2. from a pure efficiency point of view the union is better to avoid constant currency exchange, but it needs a central fiscal authority to regulate demand without credit constraints.

    yes, greece could easily do it alone with their own currency, as could the others. as could each us state. but, again, efficiencies are lost

    1. Warren,
      Thanks for that.
      But, how to solve the collective(central) fiscal authority matter with sovereign currencies ???
      I see value in cooperative and collective actions, but remaining monetary sovereignty.
      But, more importantly, you didn’t answer whether Greece would create non-debt money or need to borrow from “somebody”.
      I noticed in your CNBC interview when what’s his name asked who would lend the EU the Trillion in per capitas you said there would be no debt.
      THAT needs further edification for the restovus.
      Thanks.
      joe b.

    2. Plus in the US the Constitution endows the federal government with monopoly provision of the currency and prohibits the states from issuing anything as legal tender other than gold and silver coins. So it would take an amendment to change this.

    3. Feldstein suggested that Greek exit the Euro, devalue, and then rejoin the Euro. An impossible notion.

      Maybe Greece should do a California and start paying its vendors in drachmas, which can extinguish Greek tax obligations.

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