Skip to main content

Greek Referendum

The EuroZone deal, which was put together last week and was prematurely lauded as a success, is beginning to unravel thanks to the decision of the Greek government to hold a referendum on the deal.  The Greeks (Athenians really) gave the world democracy, which comes from two Greek words meaning "mob/people" and "power/rule".  The irony for me is that the whole euro project, which is an entirely undemocratic one, may be dealt a death blow by the power of the people.


The big puzzle for many people seems to be why the EU keeps lurching from deal to another, yet there is no solution in sight.  Are the French and German governments incompetent?  Is the political dynamic within Europe too complex, resulting in gridlock?  My view is the EU elite have known for a long time that Greece (and maybe some others) will have to leave the euro, and they are happy enough to lurch from one unsuccessful deal to another as this allows French and German banks time to prepare for the huge losses they must incur whenever Greece (and others) eventually defaults.  It also allows the ECB time to prepare for Greece's exit from the euro.



Popular posts from this blog

How Valuable Are Connections?

Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton have written a paper on whether firms connected to Timothy Geithner benefited from these connections. They do so by looking at how stocks of these firms reacted to the announcement that he was a nominee for Treasury Secretary in November 2008. They find that there were large abnormal returns for connected firms. Below is the paper's abstract and the full paper is available here . The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner's confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small ne...
Read more

Boom and Bust: A Global History of Financial Bubbles

Boom and Bust: A Global History of Financial Bubbles, co-authored with my colleague Will Quinn , is forthcoming in August. It is published by Cambridge University Press and is available for pre-order at Amazon , Barnes and Noble , Waterstones and Cambridge University Press . 
Read more

Money, Money, Money

In my copious spare time, I am a notaphilist (i.e., a collector of bank notes).  In the not too distant past, individual banks issued their own notes.  However, today, apart from in N. Ireland and Scotland, central banks around the world have a monopoly of the note issue in most economies.   At Feb. 2011, Northern Irish and Scottish banks had a staggering £1,900m and £3,500m of notes in circulation respectively.   As regular travellers across the Irish Sea realise, these notes are not legal tender.   What is special about banks in N. Ireland and Scotland that they can issue their own notes?  Simply, it is an accident of history.  As legislation was passed which centralised the note issue in England in the Bank of England, Scottish and Irish banks were given certain exemptions.  The result today is that these banks can issue their own notes. N. Irish and Scottish Banks, however, have to hold backing assets (i.e., Bank of England reserve...
Read more