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"we need to fix the banking system, not Greece, and let Greece fix itself." --In a nutshell & YES
Taken from full article:
Greece's and the Eurozone's Best Move -- Adopt Limited Purpose Banking and Then Default
http://www.forbes.com/sites/kotlikoff/2015/06/08/greeces-and-the-eurozones-best-move-adopt-limited-purpose-banking-and-then-default/
In other words, the so-called Greek crisis is not really about Greece, but about the chance that if Greece does what it clearly must do, namely default, its banking system and everyone else’s will collapse. If that’s the case, we need to fix the banking system, not Greece, and let Greece fix itself.
But can a bank run in relatively tiny Greece represent such a big concern? Yes. Recall the December 2013 banking crisis in Cyprus, whose economy is peanut-sized. The prospect of Cypriot bank runs triggering bank runs throughout the Eurozone sent shivers down European Central Bank chairman, Mario Draghi’s, spine. He quickly came to the rescue. Draghi was not taking a chance, however small, of a massive, collective loss of trust like that triggered by Lehman Brothers’ bankruptcy.
But why is the banking system so fragile? The answer is simple. No other industry in the world operates so deeply in the dark. No other industry provides so little disclosure of what it owes and owns. No other industry has such eye-popping leverage – leverage that is little changed despite Dodd-Frank, Basel III, the Vickers Commission, and other so-called U.S. and international banking reforms. And no other industry engages in such rampant and unabashed deceit, corruption, malfeasance, and political bribery.
Pervasive opacity, extreme leverage, and rarely prosecuted criminality – those are the terrible hallmarks of the world’s Wall Streets. One can’t conceive of a more dangerous way to run any economic sector, let alone one that constitutes a critical public good, namely the financial exchange system.
The Greeks fully understand their potential to gravely damage EU unity and the global built-to-fail, faith-based banking system. Indeed, this is their main negotiating trump card. But blackmailing their partners and abjuring major fiscal reform (required with or without default) is not in Greece’s long-term interest. Nor is it in the interest of other EU members to perpetually police Greece’s fiscal behavior. What’s needed is a way for Greece to default without bringing down the Greek financial system, let alone overall financial exchange
.
But can a bank run in relatively tiny Greece represent such a big concern? Yes. Recall the December 2013 banking crisis in Cyprus, whose economy is peanut-sized. The prospect of Cypriot bank runs triggering bank runs throughout the Eurozone sent shivers down European Central Bank chairman, Mario Draghi’s, spine. He quickly came to the rescue. Draghi was not taking a chance, however small, of a massive, collective loss of trust like that triggered by Lehman Brothers’ bankruptcy.
But why is the banking system so fragile? The answer is simple. No other industry in the world operates so deeply in the dark. No other industry provides so little disclosure of what it owes and owns. No other industry has such eye-popping leverage – leverage that is little changed despite Dodd-Frank, Basel III, the Vickers Commission, and other so-called U.S. and international banking reforms. And no other industry engages in such rampant and unabashed deceit, corruption, malfeasance, and political bribery.
Pervasive opacity, extreme leverage, and rarely prosecuted criminality – those are the terrible hallmarks of the world’s Wall Streets. One can’t conceive of a more dangerous way to run any economic sector, let alone one that constitutes a critical public good, namely the financial exchange system.
The Greeks fully understand their potential to gravely damage EU unity and the global built-to-fail, faith-based banking system. Indeed, this is their main negotiating trump card. But blackmailing their partners and abjuring major fiscal reform (required with or without default) is not in Greece’s long-term interest. Nor is it in the interest of other EU members to perpetually police Greece’s fiscal behavior. What’s needed is a way for Greece to default without bringing down the Greek financial system, let alone overall financial exchange
Article written by: Laurence Kotlikoff, professor of economics at Boston University, a Fellow of the American Academy of Arts and Sciences, a Research Associate of the National Bureau of Economic Research, a contributor to Bloomberg, the FT, the Economist, Forbes, and other media and President of Economic Security Planning, Inc.
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Comments welcome. I can't believe someone actually had the audacity to come out and say it, it's the banks...OF COURSE. While we await an outcome, the truth is...well...apparent. Yet, what direction will be taken is not clear...since it's been said default is possible with or without leaving...which is really what we want to know. We know the debt is crazy & unsustainable, it's the interest too, it's all crazy, all this austerity, all the beggary thy neighbor, the disaster, predatory capitalism, the corrupt entities that all made it possible...damn that Troika!
4 replies
= new reply since forum marked as read
= new reply since forum marked as read
the corruption of banking, plain as day, in print, not like we didn't already know it, but at long last...it is spoken in regard to the Greece fiasco.
Forbes is tricky sometimes. 
