Grexitology – A Mexican Standoff
The Greek Conundrum
As you can see above, we have created a new term describing deliberations regarding the possibility of a Greek default combined with an exit from the euro area. The reason why the time for the term “Grexitology” has come is that opinions on Greece’s future in the euro zone are plentiful and are covering the entire imaginable range, from “it would actually be a good thing” (getting rid of the weakest link in the euro chain) to “it won’t happen” to “it doesn’t matter” to “it will bring about the end of the world”.
In the latter category we find the always dependable Ambrose Evans-Pritchard, pronouncing imminent doom. He thinks that everybody is too complacent about the “contagion danger” in light of financial markets so far confining their negative reaction to Greek bonds and stocks instead of meting out more broad-based punishment (e.g. Spanish and Italian government bond yields have so far barely budged from recently attained all time lows). He believes that unless Spain and Italy are getting into trouble as well, the German government just doesn’t care what happens with Greece.
We don’t want to get into his views into too great detail here. Some of what he writes is surely correct in a descriptive sort of way, but there is a constant insinuation that somehow, more money printing would “fix” everything, along with a “fiscal union”. This amounts to saying that the problems caused by credit expansion and reckless spending should best be tackled by even more credit expansion and reckless spending, a view we strongly disagree with. Anyway, Pritchard concludes by saying:
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