Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
It becomes a crisis if a sufficient mass of political leaders (people with followers) deem it necessary to elevate the debt problem to something requiring substantial applications of political power to resolve in favor of one group of people or another.

The problem is that the default expectation is that default is unacceptable. In other words, the current status quo is that political power will be applied to resolve the imbalance in favour of the creditors. Which will kill the real economy dead.

If the political consensus were that creditors who extended ill-advised credit just had to suck it up and write off the bad debts as unenforceable, the real economy would not be harmed by the need to de-leverage, because it could all be done with pure balance-sheet operations that don't involve any tangible goods or long-term cash flow commitments.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Apr 17th, 2010 at 08:57:56 AM EST
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