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I don't see why the Greeks can't continue to import food and fuel

With what hard currency?

The tourist and property industries should be hugely boosted by the devaluation and could result in a very immediate economic kick start without any expensive retooling required.

The tourist industry will not recover until the rest of Europe recovers. Which, given current German policies, will not happen in the foreseeable future.

Sure, housing could boom, but I thought the point of leaving the Euro was to avoid having a repeat performance ten years down the road...

I'm also not convinced that a Greek default will totally destabilise the EU banking system

It does not have to. But the Franco-German response almost certainly will.

sure some politically unpopular bail-outs may be required, but ultimately a heavy dose of quantitative easing should solve the problem.

QE is basically a fancy word for discount window operations, invented by people who don't like the discount window. Like all discount window operations, it requires collateral. It is possible to overvalue this collateral, but pretending that Greek bonds are viable collateral becomes tenuous when they have been explicitly defaulted on.

(Economists who are dead against QEbailouts to save the profligate Greeks and Irish will achieve a Damascene conversion when it is German banks which have to be baled out.

Probably. But if the banksters panic and send the real economy into a tailspin while they're being bailed out, you'll need Keynesian stimulus. And the EPP-PES prefers AusterityTM, so they won't do that.

Don't forget the ECB will be blamed for forcing the Greek default

You have a lot more faith in the public's and the press' ability and willingness to connect the dots than I do.

A Greek default will be blamed on the moral turpitude of brown people who speak funny. That's the narrative that's been pushed since this crisis started, and it's a comfortable one for TPTB in Germany and the other cargo cult countries.

BuBa?

BundesBank.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 08:14:29 PM EST
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