Hey Malcolm inthe Middle,I have also heard the comparisons...

Hey Malcolm inthe Middle,

I have also heard the comparisons between European GDPs and states in the US. The trouble with that sort of thinking is not so much the magnitude of the GDP but the political ramifications. Arizona (in your example) is a net borrower within the US economy and is subsidised by the state through mandated programs to a greater extent then a state like California. Even then, if it hits the fan, its not going to print its own money. People would merely move to a state that is booming. (If any).

If/when Greece defaults, they can print Drachma's and quickly devalue it, which would massively devalue people's savings and add to an already large unemployment queue. Do you think France and Germany want loads of unemployed Greeks coming across the border? More than already? What would be the social consequences of that?

700 mio EUR was withdrawn from the Greek banking system last week (the last participants in the capital flight boarding queue) and bank runs are just around the corner.

Leaving the Euro "could" make sense for Greece but would come with massive social consequences which due to Euro immigration policies would spread. Equally, a weakened Greece would put massive pressure on Spain, Portugal and Italy who would see their capital costs increase, thus complicating their plans.

When Argentina stopped pegging their peso to the USD, it hurt their economy hugely but its now coming back. In the meantime, people suffered, crime increased and they undertook the NECESSARY reforms with enabled them to get moving again. Us tourists got really cheap steaks on our holidays as well. The difference is they were not part of a monetary and cultural union the way Greece is within Europe, nor was their a risk of a runaway contagion over to Peru, Brazil and Chile.

This may come across as a rant mate, so please dont take it that way at all. I respect your contributions here a lot. I just dont want people to think that the Greek issue has any easy solutions just because they are a small econony (and I know you were not stating that mate).

Cheers