Peter Cooper — Either the Troika Has No Hand, Or I’m No Game Theorist

Mike Norman Economics 2015-07-07

Mainstream media, in presenting Greece as without hand, appears to be laboring under two very big misconceptions.

The first is a mistaken view that grexit would be disastrous for Greece. If issuing your own currency was disastrous, the rest of the world would be the economic basket case, rather than the eurozone. It is not without good reason that successive UK governments have given the euro a wide berth all these years. Under present arrangements, the euro is economically and politically unsustainable. Reintroducing the drachma would facilitate a prompt restoration of economic stability and growth in Greece.

The second mistake is to imagine that debt relief and an end to austerity in Europe is “unaffordable” and would destroy the euro. The ECB has unlimited capacity to issue euros, just as currency sovereign national governments have unlimited capacity to issue their own currencies, and such issuance is needed right now to restore demand (employment, growth) and price stability (avoid deflation).

heteconomist Either the Troika Has No Hand, Or I’m No Game Theorist Peter Cooper

Here's my take which I just shared with Clonal:

I agree that the eurocrats have backed themselves into a corner. They cannot give Greece a beneficial deal or the other peripheral countries will want similar treatment.

So the alternatives are that either Syriza caves, is replaced by a compliant government, or Grexit.

I think the many in the German elite are looking at Grexit and just being done with Greece once and for all as more trouble than it is worth.

The US looks at it differently. European integration for the US means NATO under US control and the US has no overriding interest in the EZ or a united Europe.

In fact, a United States of Europe would be fearsome competitor for the US and would likely threaten NATO. A Europe allied with Eurasia would end US global hegemony.

Above all, the US doesn't want Greece moving closer to Russia and China, potentially threatening NATO domination in Europe.

So while Germany is the key player in the EZ, the US is the elephant in the room. The US strategists are certainly focusing on this today.