Reflexões sobre a Grécia

Last Greek thoughts, por John Cochrane:

Greece seems to be coming to a standstill. (...)

... many [Greeks] have simply stopped making payments altogether, virtually freezing economic activity. (...)

“Business-to-business payments have almost been paused,” one Athens businessman says. “They are just rolling over postdated cheques.”

(...) If a Greek goes to the ATM and takes out a load of cash, where does that cash come from? The answer is, basically, that the Greek central bank prints up the cash. Then, the Greek central bank owes the amount to the ECB. The ECB treats this as a loan, with the Greek central bank taking the credit risk. If the Greek government defaults, the Greek central bank is supposed to make the ECB good on all the ECB's lending to Greece. It's pretty clear what that promise is worth. (...)

The argument is not about "lending" to Greece, i.e. covering this year's primary surplus. The argument is whether the IMF, ECB, and rest of Europe will lend Greece money to... pay back the IMF, ECB, and the rest of Europe. This is a roll over negotiation, not a lending negotiation.

The loans were not intended to be paid back now. The loans were intended to go on for decades. But with conditions. The negotiation is about enforcing or modifying the conditions for a roll-over. (...)

The latest proposed agreement includes sharp increases in tax rates. Now? Are you kidding?

I am reminded of the story of a town, that had a bridge, that had a 50 mph speed limit. A drunk driver, going 85, caused horrific crash. The town lowered the speed limit to 25. (...)

I think of taxes in terms of incentives. Keynesians look at aggregate demand. Either way, raising tax rates, now, in an economy where nobody is paying much of anything because they see the big explosion ahead seems destined, pragmatically, to raise no revenue. And, incidentally and humanely, to further crater the economy. (...)

Rolling over post-dated checks is a fascinating story to a monetary economist. Money is created when needed, apparently. (...)

Without the banks, this would all be simple. Greece could default, stay in the Euro (unilaterally if need be) and Euro zone. One government defaulting on debts to other governments is not a crisis.
All along though, the involvement of the Greek banking system makes it much harder.

Greece has 11 million people, $242 million GDP and 51,000 square miles. That's as many people as Ohio, the GDP and land area of Louisiana. Why does Greece need its own banking system in a common currency and free market zone? (...)

Imagine if Greeks deposited money in a local branch of a large pan-European bank, backed by assets spread throughout Europe. Imagine if Greeks borrowed money from the same bank, funded by deposits spread throughout Europe. A default by the Greek government on its bonds would be inconsequential to Greek banking.

[Como relembro de vez em quando, eu citar um artigo não implica necessariamente concordância]