Economist's View. Noahpinion. Anti-mankiw. Greg Mankiw's Blog. INET - The Money View Blog. Europe is embarked on a grand experiment, managing modern financial crisis without a dealer of last resort, so refusing to follow the lead of the 2008 Fed. The scientist in me thrills at this opportunity to gather new data from unexplored territory; the citizen in me quails at the brinksmanship, what Martin Wolf has called "just in time, just enough". The global markets don't much like European sovereign debt--even German debt! --and they don't much like banks that hold a lot of European sovereign debt. Forget solvency, liquidity will kill you first, solvency or no. That is why the world is cutting its exposure to Europe, big time, and who can blame them. It is true, as many commentators have pointed out, that Europe is in rough trade balance with the rest of the world; it has no deficit that requires funding.
Small comfort. But Europe too wants to cut its exposure to Europe. But it is not enough, and it is not in time. That seems to be where we are going, for better or for worse. Dan Ariely. Economy Weblog. Mainly macro. Paul Krugman.