The euro is doomed, doomed I tell ‘ee
THERE’S been much head scratching about what’s going to happen to the euro. Will anyone manage to get thumb out of bum in time to actually save the thing (pretty simple to do, just get the ECB to print a few trillion euros and set off some nice inflation) or is it going to collapse in a heap?
The betting is now that Greece is going to go: Chase puts it at a 75% odds. Paul Krugman is similarly gloomy:
Some of us have been talking it over, and here’s what we think the end game looks like:
1. Greek euro exit, very possibly next month.
The problem is, once it starts, it’s going to be very difficult to stop it. As soon as people think that Portugal or Spain might do the same then all the money will drain out of their banking systems and into Germany. The problem with this being that if all the money drains out of their banking systems then they’ll have to leave the euro.
It’s just the same as a banking run: people acting out of fear of what might happen make that actual thing happen.
I’m all in favour of the euro falling apart, of course. I’ve been saying it’s a damn stupid idea since before they launched it. It is going to be painful, very painful for an awful lot of people. But it’s going to be less painful to get it done and over with than it will be to carry one with another couple of decades of deflationary austerity. Which is the only other option because no one, no one at all, is actually going to instruct the ECB to get printing.
Posted: 14th, May 2012 | In: Money Comments (4) | TrackBack | Permalink
