This is the Times saying that Greece shouldn’t default because that would mean foreigners and overseas banks would lose a good chunk of their investments. Well, no kiddin’! That’s the whole point. Scott Talbott might get red in the face making that argument.
But the bafflement continues here. The gist of the Times’s piece is that Greece shouldn’t default because then it won’t be able to borrow more money.
For one thing, a decade later, Argentina has still not been able to re-enter the global credit market.
“A default is not free,” said Jaime Abut, a business consultant in Rosario, a city north of Buenos Aires. “You have to pay the consequences, and for a long time. Argentina is no longer considered a serious country.”
Krugman nails that quote there, asking “shouldn’t that be a Serious country?” Indeed. But why does the Times think Argentina needs to be back in the global credit market? It’s grown at 8 percent a year for eight years without being in the global credit market!
Of course, Greece is a different country than Argentina. It has different circumstances, including membership in the euro, which it would have to quit in order to do the devaluation it needs to recover (it also has a vastly higher debt-to-GDP ratio). But the Times does a remarkably poor job here of showing how the lessons of Argentina’s default might apply to Greece.
From what I can tell the main one is: Go for it.
And while this is an unfortunately sharp departure from the Times’s normal standards, it’s nice to see that Krugman feels free to take on his own paper. I understand Krugman is untouchable, but it’s still a healthy thing.