Sunday, September 11, 2011

Is There A Run On European Governments?

Paul Krugman argues that we are currently witnessing a run on governments in Europe, that is much like runs on banks. In that case, Europe needs a lender of last resort, much like the role played by central banks in most countries. He takes the position that Europe may not be ready to provide a lender of last resort under its current structure.

We should understand that the repercussions of a banking crisis in Europe will have profound affects on our interconnected international banking system. Who knows how many credit default swaps have been written by US banks?

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