Monthly Archives: March 2013

So the debate is on. Should Cyprus leave the euro-area (i.e. issue its own currency)? Alexander Apostolides says No. I’ve suggested recently that even the best-performing of the euro-adjustment group (i.e. Ireland, Spain, Italy, Portugal, Greece and now Cyprus) hasn’t performed as well as the least-well-performing East Asia crisis group. For Cyprus, the comparators are all-too-closer, both in […]

One more go at the East Asia 1997 versus Euro Area 2008 comparison. The back story is that East Asia underwent a severe crisis in 1997-98, which saw the collapse of its overvalued currency pegs. But, surprise surprise, this “devaluation devaluation” was followed by robust growth. By contrast, the “internal devaluation” (ID) strategy is to achieve the […]

The problem in Cyprus is the banking sector. To get this, you just need to look at the balance sheet of a bank, as above. Cyprus banks saw the value of their assets fall in several categories above. They were exposed to mortgages in Cyprus itself (in other words: they were mortgage lenders), which has seen […]

Probably for anyone with an expertise not shared widely, there are frustrations about what people seem to “know” about your field. I’ll be less oblique:People seem to “know” that one of the causes of the Great Depression (globally) was competitive devaluation (a.k.a.  “beggar-thy-neighbour” policy). It wasn’t. But let me back up and re-tell the story that […]

A friend recently mused that, if the euroarea periphery were not in a single currency area, the crisis we’ve seen so far would look a lot more like the 1997-98 East Asia crisis. Greece would have ‘fallen’, and contagion would have knocked down the remaining ‘weak’ countries. Bear in mind the endogeneity of such contagion: […]

Plenty of good commentary out there. See here and here especially. Cyprus’ EU partners are saying: “Not me — we didn’t insist on a haircut for small depositors.” So Nicosia wanted to protect its position as a banking centre. This is less permissible in view of the fact that it has simultaneously agreed to shrink its banking […]

Referring to the argument that, Hey, we have a problem of too much debt. You can’t solve it by adding more debt. See Krugman versus the UK government on BBC Newsnight for a recent example (go to 39:00). 1. Reject the premise — that our problem is “too much debt”. Our problem is not too much debt […]

This blog is full of lessons-unlearned since the Great Depression. Why so? Because, fortunately or not, I’ve spent a portion of the last several years working on the Great Depression from a monetary and policy perspective. One of the interesting things about that period is the soul-searching it occasioned. This soul-searching is a good place to […]

Abenomics (noun): The use of macro policy to stimulate the economy. See also “Keynesianism”. Japan’s newfound enthusiasm for macro policy is going to provide a helluva interesting real-life test of the competing notions over whether OECD governments are doing too much or too little to tackle anaemic growth rates. My guess is that the austerians will have […]