A couple of points, Lawry. One is that the banking system is highly connected internationally. To lend money to the Greek or Spanish governments, Greek or Spanish banks borrowed money from banks in other countries. The impact would likely be similar to that of the American sub-prime mortgage crisis of some four years ago. Via the widely traded Consolidated Debt Obligations it was not only American banks that lost a lot of money, but foreign banks as well. I think defaults by the highly leveraged members of the EU would have a much larger negative impact than the sub-prime crisis.
The other point is that the EU governments of Greece, Italy, Spain, Ireland and perhaps others (France?) have kept themselves going by borrowing huge sums of money. If they defaulted, it is unlikely that anyone would want to lend to them. What might that mean in terms peace, stability and living standards in those countries? Ed ----- Original Message ----- From: de Bivort Lawrence To: [email protected] Cc: 'RE-DESIGNING WORK, INCOME DISTRIBUTION,EDUCATION' Sent: Sunday, June 03, 2012 10:17 AM Subject: Re: [Futurework] [Ottawadissenters] A little more on the Euro A simplistic question, but one that may, I hope, cut to the chase: What is the problem if Greece and perhaps Italy and Spain simply default on their debts, and do nothing else? I can readily see that lenders would subsequently shy away from making any new loans to those countries, of course, but...so what? Can we build a damage/risk tree out from this initial question? Cheers, Lawry On Jun 3, 2012, at 9:20 AM, Ed Weick wrote: There seemed to be some agreement yesterday that exit from the EU by Greece and perhaps others like Spain and Italy was inevitable. But is it really? Greece, Spain and a few other countries have huge debts -- but debts that are denominated in Euros. It is highly unlikely that creditors would accept repayment in far less stable currencies like the drachma or the peseta, and default by some of the larger EU debtors could wreak havoc with the international banking system. Exit from the EU is, IMHO, most unlikely unless someone steps in and provides the kind of bailout supports needed. Perhaps the IMF or, as Barry suggested, Russia? For a countries like Greece or Spain, would being beholden to Russia be better than being under Germany's thumb? Ed __._,_.___ Reply to sender | Reply to group | Reply via web post | Start a New Topic Messages in this topic (1) Recent Activity: Visit Your Group Switch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use. __,_._,___ ------------------------------------------------------------------------------ _______________________________________________ Futurework mailing list [email protected] https://lists.uwaterloo.ca/mailman/listinfo/futurework
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