john: “Nick, in case your greek obligations was denominated within the euros following wouldn’t the fresh new greek state need to pay desire on that debt (and you can pay-off your debt ultimately) within the euros?”
I don’t note that going on somehow since there is certainly not enough stuff Greece can be export so they are able enjoy themselves from the gap they might be in the
I don’t believe that’s true. The brand new Greek condition needs to pay back the expense inside Euros, not inside Drachmas well worth as much as this new Euro loans. Euroland won’t take on him or her. Thus, even though they were able to order an evergrowing actual number of Drachmas for the taxation costs, even though they managed to create a beneficial veritably residential growth, they would still have to obtain the brand new Euros with which to help you pay back the Euro expense. And that naturally is mind-defeating.
The only way one a separate MOE can perhaps work is if they results in a substantial rise in exports which can be paid off to possess in the Euros. They need to secure the brand new Euros for the Euroland / of Eurolanders, maybe not in the home. There can be simply a lot of olives Euroland will eat and only thus of numerous Greek holidays he’s ready to purchase, particularly because remainder of southern area Europe is within recession as well.
By firmly taking a secured asset (shares in your analogy) that is already merely willingly held (none excessively request neither extreme supply) and you will amazingly (but that is Ok, as this is an idea-experiment) convert it to the an enthusiastic MOE, your help the source of MOE you can also increase the newest demand for MOE because of the the exact same count. Continue reading