As previously discussed, once Greece does it, it’s compelling for everyone else to do it.
It’s the classic fallacy of composition.
When someone stands up at a football game to get a better view,
it quickly makes sense for everyone else to stand up as well.
Yes, you can say they all are better off if everyone stays seated,
but once one goes, all go.
So expect a serious shock wave to quickly depreciate all euro debt.
Irish want debt concession if ECB aids Greece
Feb 8 (Reuters) — Ireland would see any European Central Bank contribution to the restructuring of Greek debt as a precedent that would boost Dublin’s efforts to ease the burden of its own sovereign debt, the country’s finance minister said on Wednesday…
Finally got around to reading this interview. Some perspective on debt forgiveness.
http://www.nakedcapitalism.com/2011/08/what-is-debt-%E2%80%93-an-interview-with-economic-anthropologist-david-graeber.html
No matter how the ECB tries to structure this, it has the effect of a currency defaullt. One currency s/b backed by one debt. This EZ structure just moves FX adjustments to national debt adjustments, which defers and accumulates adjustments.
We are watching a train wreck in super slow mo, and the damage is going to be huge.
Its called “the vise.” Every concession is a turn of the handle and also brings demands for other concessions. Greece is turning into the EZ’s Lehman and provoking another Credit Anstalt moment, this time with a country rather than a bank.
Demanding consessions? Just as easy as they can levy 22 cents per plastic shopping bag or tax wages w/ 41% they can tax Irish government bond ownership w/ 70% of outstanding nominal. Banks, just like consumers and employees, have no choice but to concede.
As for now the ecb still intends to hold its Gr bonds till maturity or maybe sell them to efsf.
“once one goes, all go.”
Is it possible the folks in Brussels are intent on showing Greece the exit? Their additional piling on of conditions today seems to imply that.
If so, maybe they’re hoping to make it a binary choice for EMU member nations, where a “non-default default” means departure from the eurozone? Or metaphorically, anyone who stands up to see better will be escorted out of the stadium?
If so, they might still be able to thread the needle–as long as the ECB keeps operating beyond their mandate.
@Art Patten,
Sounds like the “allacy” of decomposition. Everyone turns to growing mushrooms.