Might the euro actually collapse? I’m stating to dread reading the newspapers and listening to the radio because the news always seems worse. The irony of the current situation, to my mind, seems to be that the Germans, who really didn’t cause the problem, seem to be the biggest obstacle to the obvious solution. If the European central bank engaged in a new round of ‘quantitative easing’, essentially printed money by buying up the debts of countries like Portugal, Ireland, Italy Greece and Spain (the PIIGS), and then quietly forgiving them, the debt crisis would disappear. There would be no issue anymore of sovereign default. The markets would be reassured the nobody would default on any remaining private debt, countries could take the time needed to get their current account deficits in order and the whole confidence trick system could continue as normal. BUt the Germans won’t have it because they don’t want the euro area inflation (which would presumably be the confidence of the central bank paying out euros for these outstanding government debts). But, and I don’t pretend to really understand what’s going on, by not taking steps necessary to ‘reassure the markets’, European leaders just seem to be making the bad situation worse. It used to be just Greece, then Ireland, then Portugal, now Italy and Spain, next their talking about downgrading the credit ratings of Belgium and France.
Here’s the thing. What would the days before a catastrophe feel like? Probably much like any other day. We could now be days away from catastrophe and not know it. What if the ATMs suddenly stopped working? There might be long queues at the banks to try to take out money. They might be turning people away. The supermarkets might not restock for fear that they wouldn’t be paid. HOw many days worth of food is there in a big city? Should I be stockpiling tins and salting away cash? What would happen?