The NYT Is Wrong: Greece Shouldn’t Accept Endless Depression Because Default Might Be Painful

[marmar]

from In These Times:



The NYT Is Wrong: Greece Shouldn’t Accept Endless Depression Because Default Might Be Painful
The paper of record says Greeks should look to the example of Argentina’s 2001 default. But that default actually seems to have tremendously benefited the country.

BY DEAN BAKER


James Stewart had a piece in the New York Times telling readers that if Greece were to leave the euro, it would face a disaster. The headline warns readers, “Imagine Argentina, but Much Worse.” The article includes several assertions that are misleading or false.

First, it is difficult to describe the default in Argentina as a disaster. The economy had been plummeting prior to the default, which occurred at the end of the year in 2001. The country’s GDP had actually fallen more before the default than it did after the default. (This is not entirely clear on the graph, since the data is annual. At the point where the default took place in December of 2001, Argentina’s GDP was already well below the year-round average.) While the economy did fall more sharply after the default, it soon rebounded, and by the end of 2003 it had regained all the ground lost following the default.



Argentina’s economy continued to grow rapidly for several more years, rising above pre-recession levels in 2004. Given the fuller picture, it is difficult to see the default as an especially disastrous event, even if it did lead to several months of uncertainty for the people of Argentina.

In this respect, it is worth noting that Paul Volcker is widely praised in policy circles for bringing down the U.S. inflation rate. To accomplish this goal, he induced a recession that pushed the unemployment rate to almost 11 percent. So the idea that short-term pain might be a price worth paying for a longer-term benefit is widely accepted in policy circles. ...............(more)

http://inthesetimes.com/article/18124/nyt-warns-greece-to-accept-endless-depressionbecause-default-might-be-painf

[geek tragedy]

1. Argentina could manipulate its own currency

Greece would need to leave the Eurozone to enjoy similar capabilities.

SYRIZA is insisting they won't leave the Euro.

Leaving the Euro would also hurt tourism at least temporarily--and if there's violence and unrest . . .