Economics Roundup: Existential Questions for Greece, Japan, and the U.S.
“To be or not to be” is not just for Hamlet, it’s the existential question of the International Swaps and Derivatives Association (ISDA), the ruling body on credit default swaps. After much ballyhoo about whether or not Greece’s restructuring would technically qualify as a default, the ISDA ruled that Greece’s restructuring in March is in fact a default, thereby triggering credit default swaps on Greece sovereign debt. While it was touch and go for a while there, it seems the obvious will prevail. Nevertheless, despite the restructuring and despite the ISDA ruling, the IMF remains concerned about Greece’s outlook, as noted in a recent Wall Street Journal article. So, it looks like the Grecian tragedy is far from over.
And for those who thought the European debt crisis was over, guess again. As we have speculated for some time, countries like Greece and Germany are perhaps too dependent on the Euro (for different reasons) to seriously consider leaving the currency union. But maybe there are other constituents that aren’t. What would happen if, say, Holland, up and decided to leave the Euro? Well, some folks in Holland are asking that very question. And there is precedent. Remember when Lithuania left the Ruble in 1993? Me neither, but here’s an overview penned by the New York Fed of the various countries departing the Ruble Zone and why.
Speaking of existential questions, Japan is starting to realize it may have a crisis of its own. As illustrated in a Wall Street Journal article, Japan is finally looking a bit more critically at itself and trying to assess the status quo. Can it continue? That’s Japan’s question!
Finally, while the Fed also voted to keep interest rates near zero through 2014, they also noted that strains in the global financial markets have eased, that household and business spending improved somewhat, and that unemployment has begun to improve, albeit modestly. My existential question: Can the status quo continue?
For more news and trends, visit the Economics Community of Practice.