In short, I'm depressed. Thanks, Nouriel.
Sunday, November 6, 2011
Roubini and Depression
Krugman cites Roubini On Internal Devaluation characteristically predicting gloom and doom in Europe. I was optimistic about European leaders responding to the obvious disfunctions in the Eurozone institutions by enhancing the EU's capacity to do the kind of things states do when faced with asymmetric shocks. Now I'm not so sure. The failures of the past two weeks make it more and more likely another Lehman-style collapse will force their hand. By that stage, the distrust between member states and the increasing costs of resolving the problem will make it harder to cut the kind of deal that is needed.