Market Reaction
Robert Preston, BBC economics editor and the man who coined the term “Septic Bank”, looks at the Greek election: Why aren’t markets panicking about Greece?
Here is the important point: outside of Germany it is almost impossible to find an economist or central banker who believed that the previous reconstruction of Greek debt was ever going to work.
So just maybe, after Greeks have made a colossal and some would say pointless economic sacrifice, Germany will allow a rescue that permits the country a fighting chance of crawling out from beneath its colossal debts.
Preston notes that rather than helping the Greeks reduce their debt as a percentage of GNP, it as made it worse because austerity has been shrinking the value of the economy, just as Keynes said it would. Even the stock markets knew this would happen, but the German and French banks didn’t want to lose anything for their reckless behavior.
The financial system caused the global meltdown that made it impossible for Greece to make its debt payments, but the banks that were responsible for the recession wouldn’t accept any ‘pain’ for the agony they inflicted on the world.
January 26, 2015 Comments Off on Market Reaction
