Only a more active ECB can solve the euro crisis
De Grauwe, Paul. This paper asserts that the contagion currently afflicting sovereign bond markets in the eurozone can only be stopped if there is a central bank willing to be lender of last resort, i.e. willing to guarantee that the cash will always be available to pay out the bondholders. Until recently, the European Central […]
The Root of All Sovereign-Debt Crises
Bhidé, Amar & Phelps, Edmund. The Greek debt crisis has prompted questions about whether the euro can survive without a nearly unimaginable centralization of fiscal policy. There is a simpler way. Irresponsible borrowing by governments in international credit markets requires irresponsible lending. Bank regulators should just say no to such lending by institutions that are already under […]
Debt burden in advanced economies now a global threat
Prasad, Eswar & Ding, Mengjie. Our analysis paints a sobering picture of worsening public debt dynamics and a sharply rising debt burden in advanced economies. These rising debt levels combined with heightened concerns about fiscal solvency now constitute a major threat to global financial stability. Recent events in Greece, Ireland, Portugal and other economies on […]