February 22, 2010 – 11:21 pm
I found George Soros’s piece today at the Financial Times quite insightful, for a number of reasons. But it’s worth noting one particular point:
When the financial system is in danger of collapsing, the central bank can provide liquidity, but only a Treasury can deal with problems of solvency. This is a well-known fact that should have been clear to everyone involved in the creation of the euro.
In the most practical sense, the EMU has already dissolved. The whole point of the euro was to allow all the weaker states to borrow Germany’s balance sheet so they could borrow at low interest rates. That in turn meant they could build up internal living standards, which in turn meant that they could afford to buy more of Germany’s exports. The genius of the plan is that, after 1000 years of trying, it finally gave Germany a way of taking over Europe without killing people.
And for ten years it looked like it was working just fine. Today, the yield spread between Germany and Greece is nearly 400 basis points. The game is already up.
February 9, 2010 – 10:10 am
Word this morning is that there will be some kind of bailout for Greece. I would expect it to take the form of a guarantee of Greek sovereign euro debt, with some degree of explicitness and a time limit. They have to roll over about 23 billion euros over the next few weeks.
To those who have pointed out that the ECB has no fiscal authority: quite right, but that’s not what’s needed here. The ECB and other authorities can guarantee Greek debt just as they did with interbank loans during the financial crisis. I keep thinking there’s a role for currency swaps with the Swiss National Bank, but I haven’t heard talk of that from anyone else.
As I’ve pointed out before, this never felt to me like the kind of crisis that would produce another 2008. The Eurozone people have way too much invested here, on two fronts. First, they can’t afford for anyone to question the viability of the euro, and possibly risk higher interest rates across the zone. Second, they can’t afford to let the IMF rescue Greece, because it would look like they don’t have things under control.
It’s almost comical to hear the French…
October 28, 2009 – 12:04 am
Today’s podcast focuses on Christina Romer’s comments about a VAT, and George Soros’s latest efforts against the free market: the creation of a $50 million thinktank, intended to be endowed with more than $200 million, focused on the effort of ending the free market and making the case for massive government regulation.
By Francis Cianfrocca
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Posted in Features, Market, Podcasts
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Also tagged Arthur Brooks, Christina Romer, Coffee and Markets, free markets, Institute for New Economic Thinking, Keynesianism, Podcast, Podcasts, too big to fail
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George Soros called for much stricter regulation of credit default swaps in the Wall Street Journal today.
