Never a good idea to get economic news from NPR even when the economists aren’t Krugman or Stiglitz.
I should know better than to listen to the Diane Rehm show, but I can’t help myself some times. Sports talk doesn’t do it for me, so I listen. Today on the show they had 3 mainstream economists, Fred Bergsten from The Petersen Institute, Desmond Lachman from AEI, and the economics editor of the Wall Street Journal David Wessel. Not exactly a group of Marxist loons. Still, I found myself talking back to my computer in frustration as I listened.
Of the 3 Lachman was the was the most reasonable. His understanding of (or perhaps his willingness to discuss) Greek contagion was pretty spot on. He rightly believes that the Euro zone is in fundamental trouble.
Bergsten pooh-poohs this. In the end he says Europe will get it’s act together. It will force blood out of the Greek turnip, which will save the French and German banks, and the march toward further European union will continue.
Bergsten also wags his finger at Greece because the opposition in Greece has not gotten on board with austerity. Look at Ireland, both labor and the conservatives capitulated. Who is Greece to buck the system? It is after all only 3% of the Euro zone.
Then why Mr. Bergsten are you so concerned?
The truth is Greece should default and leave the Euro zone. The Icelanders defaulted and are now slowly, but steadily coming back. Greece might be able to do the same.
But if Greece were to default that would be a big blow to UBS/Warburg and Societe Generale and even more importantly to the idea of a “Greater Europe.”
Therefore a Greek default just can’t happen. Can’t—but probably will.
Nick Sorrentino 11-3-2011