This one sentence sums up what I think is the fundamental problem: "An insolvency problem was thus dealt with as if it were a case of illiquidity." That is, the problem isn't some ephemeral panic where people are temporarily unwilling to lend. The problem is there are massive capital losses that have yet to be acknowledged. The problem is that Euro politicians believe that by continuing to bankroll Greece they will stem a wider panic. But as John Mills observed in a speech given to the Manchester Statistical Society in 1867, “panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its
betrayal into hopelessly unproductive works”
The losses must be acknowledged. The only question is by whom? By the people who made the loans? Or will the taxpayers of Europe be called upon, as the taxpayers of America were, to eat the losses?
The losses must be acknowledged. The only question is by whom? By the people who made the loans? Or will the taxpayers of Europe be called upon, as the taxpayers of America were, to eat the losses?