The Three Sides of the Crisis
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Hi i want ask about the certificate
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When I think of a bank run, I usually think of a situation where a (possibly unfounded) *fear* of bank insolvency causes withdrawals. The fear and subsequent withdrawals themselves cause the bank to fail, even if it were otherwise healthy. Were Greek banks insolvent in reality, or was there just an unfounded fear that they were, or might soon become, insolvent?
Second, why is it necessarily bad for the Greek economy if capital flows from Greek banks to German banks, especially if the Greek banks are actually unhealthy rather than just being (falsely) perceived to be unhealthy? Does the common currency only make it easier for Greek depositors to put their money in German banks but not for German banks to lend to Greek borrowers? Why does each country need its own banks instead of having free trade in banking services, at least within the Eurozone?
Different definitions of debt for Europe and US there, I think. Using the same definition as in Europe (including sub-national debt), I think the US comes out at around 100% debt to GDP ratio.
The United States has a "common currency zone." The problem with having a common currency seems to be connected with having different governments and banking systems pursuing fiscal and monetary policies under a common currency. Having a common currency alone does not by itself seem to be the real issue.
Isn't availability of credit that isn't based on households saving the real foundation of the financial problems in Europe? Would the Eurozone Crisis have been possible without elevated borrowing financed by money creation?
I understand about the different capital inflows and outflows but still don't understand why the common currency is the basic problem.
Why should a banking crisis cause an economic crisis? That result seems to be a systemic issue that could be avoided easily without fractional reserve banking.
The capital flows from Greece to Germany couldn't happen without debt creation. Seems like a debt-credit problem, not a capital flow problem.
Why did the Spanish economy hit the skids? Why is the Italian economy stagnant? These outcomes aren't just naturally occurring phenomenon, are they?
> Why should a banking crisis cause an economic crisis?
It probebly should not, the question is causality. I dont think its the banking problem causing problem in other areas, I think its the other way around.
> That result seems to be a systemic issue that could be avoided easily without fractional reserve banking
You also loose a lot of potential investment without FRB. That said, if the banking crsis is not the causal factor then there is no problem with FRB
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