Growth Right Away

Photograph by Kostas Tsironis/Bloomberg

Some argue that Greece’s real GDP would be much lower in an exit scenario than it would be during the hard slog of deflation. But that is logically flawed: even with deflation, real purchasing power would fall, and the real value of debts would rise (debt deflation), as the real depreciation occurs. More importantly, the exit path would restore growth right away, via nominal and real depreciation, avoiding a decade-long depression.

— Nouriel Roubini, Greece Must Exit, Project Syndicate, May 17, 2012.

Japan. Except, Greece is not Japan.

Argentina. Except, Greece is not Argentina.

Greece is Greece, and either you agree with Professor Roubini or you do not.

Where am I? I agree with both, in that we are past the point of no return.

There are cogent and tangible arguments for Athens staying in the Union. But they have been OBE (overcome by events).

Roubini and Feldstein and Wyplosz and Dumas and … win out. Why? The hope and audacity of “growth right away.” Discuss.