Any economist would look at the news coming out of the EU this morning with a healthy dose of skepticism: by granting Greece a reprieve, they reduce their incentive to "fix" their fiscal mess; and by granting banks a reprieve, they increase the incentive to take on further risk. Zerohedge explains:
the European joke has come full circle. Indebted nations borrow more money to bail out other indebted nations who ask insolvent banks to cut a 50% off deal on the loans that were given to them, but the insolvent banks will then have to raise capital which the will of course borrow from the over-indebted nations whom they just gave money to. Get it? Problem solved - BTMFD!!!.
Today, the Obama Administration announced it is taking steps to increase college affordability by making it easier to manage student loan debt. The announcement is part of a series of executive actions to put Americans back to work and strengthen the economy because we can’t wait for Congressional Republicans to act. GOOD !
ReplyDeleteAbroad and domestically, I am curious how the plans look to avoid the moral hazard implicit in their actions.
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