Just a quick thought, but what happens if Greece leaves the Euro and then a year or two after, things start improving rapidly. What would be the reactions of the other Euro peripheral countries like Spain and Italy.
Would the electorates there go further to the non-austerity parties if things have not improved?
Paul Krugman recently blogged about the recent ECB (inadequate) rate cut (link below). Basically, keeping Europe on a course to overall recession (or stagnation) keeps downside risk for equities high and bonds postive (BND and NLY IMHO). The day ECB says they are the lender of last resort (if ever), markets rock.
Krugman blog: http://krugman.blogs.nytimes.com/2012/07/05/ecb-death-wish/
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Tagged austerity, bonds, cowen, ecb, economics, equities, europe, germany, greece, investment, italy, krugman, lucas, roach, spain, stimulus