(Reuters) - Billionaire investor George Soros has warned Europe's debt crisis risks triggering another Great Depression unless euro zone leaders adopt a series of radical policy measures, including the creation of a common treasury. Soros, in an article for the New York Review of Books and Reuters.com, says policymakers must prepare for the possibility that Greece, Portugal and perhaps Ireland will have to default and leave the euro zone. (link.reuters.com/qap73s)
"It appears the authorities have reached the end of the road with their policy of 'kicking the can down the road'," he says.
"Even if a catastrophe can be avoided, one thing is certain: the pressure to reduce deficits will push the euro zone into prolonged recession. This will have incalculable political consequences."
Read the rest at Reuters, European treasury needed to avoid Depression-Soros
Tom, Prior to our US problems wrt the I-banks in 2008, it probably would have been a good idea to let those Ibanks have access to the Fed, I remember Mike and Warren making this type of case back in 07/08. But the US policymakers didnt of course act proactively and let Bear and Lehman go and chaos ensued, then they let the Ibanks have access to the Fed anyways...
ReplyDeleteNow a proactive action for Europe would be probably what Soros identifies here or Warren has a solution also... will the policymakers in Europe learn from the US mistakes of 2008? Or will they let it get out of hand before they act?
I think a model for the results of inaction (Greek default) would be the world markets reaction to the US case of inaction in 2008, with bonds taking off and equities taking a temporary hit until policymakers acted.... you could look at this as "it's only Greece" but you could have also looked at the US case in 08 as "it's only Lehman" (tragically like Paulson did)...
Matt, I think that a Greek default would have a similar effect to Lehman in 2008 and Credit Anstalt in 1931. It's crazy to contemplate it. I don't know what they are thinking of.
ReplyDelete