Sunday, June 26, 2011

Krugman on Argentina and Greece

Here's a great post on Argentina's default and it's aftermath.

Real business creators are not unfamiliar with default.  Before you one can bet a truly successful business going, it's likely you have been through several defaults.  Of course in that case, the investors know they are taking a large risk, but a few big payoffs can make up for a bunch of bad bets.

But when lenders can get the public to bear the burden imposed by their leaders, the rhetoric changes, and default is something that can not even be considered by Serious People.  This is all a cover, really, for continuing class war, the one the wealthy are winning.  The real moral hazard is in the assumption that the general public will always bear the cost of bad loans.

Of course the success after the default wasn't caused by the default, that was due to the hard work of the Argentine people.  But they could probably not have gotten there without the default.

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