More on Greece

Protesters in Athens marching against austerity measures

I don't know why I find Greece so fascinating, I suppose it's like watching a giant train wreck in slow motion, but the whole Greek debt crisis has me transfixed.  I wonder if capitalism will survive.

The latest interesting article, Bad Cop; Crazed Cop – the IMF and the ECB by William K. Black reviews many of the historic blunders of the IMF and the ECB with regard to the European debt crisis and especially the Greek situation.

The ECB could not, under its long-held view of its own rules, save Greece. The ECB reinterpreted its rules to create a second mission and a second function to (belatedly) respond to the EU’s sovereign debt crisis. The ECB became a lender of last resort to euro members. (EU members that retain sovereign currencies with floating values such as the UK are not subject to any involuntary default risk. They can always pay debts denominated in their own currency.)

The ECB managed to get nearly everything wrong in its dealings with Greece. Even the IMF is distressed by the ECB’s response to the crises of the periphery. The first problem was the most understandable. The ECB took too long to respond to the Greek crisis. Delay was inevitable because the ECB did not have a “lender of last resort” program and had taken the position that it could not and should not have such a program because its sole mission and function were achieving price stability through monetary policy. Nevertheless, delay was very harmful. Greece twisted slowly in the wind, taking substantial economic damage. The ECB appeared to lack decisiveness. Speculation arose that other nations on the EU periphery would also need help from the ECB, which led to attacks on their sovereign debt issuances and damage to their budgets and economies.

There is no doubt that the current crisis represents the most challenging times for modern capitalism.  Will we see capitalism flame-out over this?  Will the people finally rise up against the Galtian overlords and usher in a more just and equitable society?  Stranger things have happened.

Go read it.