Eco+Nomics

I honestly have to admit that I never was, and I hope I will never be, a supporter of the EMU dissolution, or of the exit of any member-state from the Euro. I have previously expressed myself as far as Cyexit is concerned and I am not intending to reconsider my views. When Krugman wrote that the only solution left for Cyprus given the current circumstances is quiting Euro  I started thinking about debt dynamics, currency in circulation, destabilization, spillovers, etc. A couple of hours later Krugman described Cyrpus being between Scylla and Charybdis  and as a matter of fact Cyprus is indeed between the two monsters of Greek Mythology.  The main argument is that by cutting a deal with troika austerity measures- the one and only panacea- will be implemented, Cypriot economy will dip into recession and thus debt will become explosive. Correct! Absolutely correct!  I believe that everyone who has at least some non-neoclassical logic left would agree. Below,...

It has not been a very long time (at all) since I begun my undergraduate studies in economics and from what I remember there were only a few (conventionally) risk free assets: cash, government bonds, deposits. At this moment we really need to focus on the Euro-zone. Government bonds, i.e. debt issued by government, although involving some risk this is low- currently a little higher; cash is the bills and coins in circulation and is totally riskless, unless in cases of over-inflation; and deposits which... used to be risk-free. That is because European Commission is thinking of de jure haircutting savings when the firm that accommodates them is at stake. If that is approved, Euro will never be much of a  hard currency  and hence there is no point at all calling upon low inflation exclusively.  In addition, we have to start thinking of our deposits as risky and, as a matter of fact, the probability that we lose a given fraction of our deposits equals the probability of b...