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Apr 6, 2008
The Eurozone's three Ds: default, default, and default | Investment and Business News

"Firstly, default of some sort seems inevitable. Secondly, it seems that in a funny kind of way, Angela Merkel and arch-Keynesian Paul Krugman agree. Both seem to think that markets need to be encouraged to throw their money at business, and stop wasting it on buying assets they think are safe but in the process do little for the economy, which in turn makes these assets far from safe. And finally, there is a warning about interest rates"

"But what Mr Krugman has said, on numerous occasions, is that if investors stopped buying government bonds, and threw their money at business, GDP would rise and government borrowing would fall. So, he is suggesting that while a flight from bonds would be bad news for governments trying to raise money, such a development would be good for the economy as a whole, and that in any case, governments would not need to borrow so much."


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