Daniel Davies wrote:
> Michael Pollak wrote:
>
> >If in fact the inflationary aspects could be entirely avoided by
> >defaulting on debts, well then, that's a national economic policy a lot of
> >countries could avail themselves of today.
>
> Could and in my view should, and (I predict) increasingly will now that
> Russia and Ecuador have come through the process without Armageddon,
> whatever Charles Dallara and the IIF say.
>
Are you sure those two examples will inspire emulation? An article in today's Financial Times entitled "Ecuador currency plunges as crisis deepens" says that "Ecuador is facing its worst economic crisis in 70 years." Admittedly, that doesn't constitute a disproof, since Ecuador has gone through a lot more than a default over the last year; it's been kind of an Annus Horribilius. But still, it's not the sort of thing to inspire the troops. And Russia has a nuclear protection from creditors that few other highly indebted countries can avail themselves of.
I also wonder if that last point doesn't apply, mutatis mutandis, to Germany as well. Would she have been able to capitalize on her creditors' discomfort without declaring war on them? And doesn't this idea that "force matters" that hold true to some extent for the US in the 19th century? Wasn't there an implicit "come and get it" that Britain never took us up on - - but which she would have if we had been China? Is this really a strategy that a militarily weak, easily invadable and/or subvertible country can get away with?
Michael
__________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com