Lars Christensen

About the Author Lars Christensen

Lars Christensen (born 1971) is Chief Analyst, Head of Emerging Markets Research and Cross Asset Allocation at Danske Bank. Earlier (until January 2001) Lars Christensen worked as an economic policy analyst at Danish Ministry of Economic Affairs. Lars Christensen has a master degree in Economics from the University of Copenhagen (1994). Twitter: @MaMoMVPY Lars Christensen is the author of the book “Milton Friedman – en pragmatisk revolutionær” (“Milton Friedman – a pragmatic revolutionary”) published in November 2002. He has contributed to numerous other books. Lars is widely quoted by most international financials media – Financial Times, The Telegraph Bloomberg, Reuters, Dow Jones Newswire etc. In 2006 Lars co-authored the report “Geyser Crisis”, which forecasted a major economic crisis in Iceland. As head EM research at Danske Bank Lars has long experience with analysis the Central and Eastern European economics. He is well known in the region among both the wider public and among policy makers – particularly in Poland and the Baltic States. Finally 


Lars also blogs at marketmonetarist.com. His blog The Market Monetarist has since it was started in 2011 become one of the leading international blogs on monetary policy. Lars has coined the name Market Monetarism. Market Monetarism is a new school of economic thought that has emerged primarily in the blogosphere. Market Monetarists like Lars advocate that central banks should target the nominal GDP level (NGDP level targeting). Lars Christensen is also a Senior Fellow at the Adam Smith Institute. Lars is the founder of the Global Monetary Policy Network – an informal network of individuals with interest in monetary policy issues.

Is This the End Game or a New Beginning for Greece: We Have Seen All this Before

The end game or a new beginning for Greece? We have seen all this before | The Market Monetarist

Ever since I started my blog in 2011 Greece has been on the verge of banking crisis, sovereign default and euro exit. It now looks as if we might get all of that very soon and very quickly.

This is from CNBC today:

Talks fell apart between the Greek government and its creditors, and European officials said Athens’ bailout program will expire on Tuesday.

Euro zone finance ministers met to try and thrash out a reforms-for-rescue deal for Greece after the country’s prime minister threw a curveball of a referendum on the deal late Friday night. During Saturday’s meeting, the finance ministers rejected Greece’s request for a one-month bailout extension, meaning that Athens could soon face very serious economic issues.

“It’s not a question to see what might happen on Monday. In terms of a crisis (for Greece), the crisis has commenced,” Irish Finance Minister Michael Noonan said after the day’s second meeting.

Greece is due to pay the International Monetary Fund 1.5 billion euros Monday and without a deal this weekend risks missing that payment.

I can’t say I am surprised we are here now – maybe I am surprised that it has taken this long – but the rest is unfortunately not that surprising to anybody who has studied economic and monetary history. We have seen all this before.

I wrote about that already back in 2011:

The events that we are seeing in Greece these days are undoubtedly events that economic historians will study for many years to come. But the similarities to historical crises are striking. I have already in previous posts reminded my readers of the stark similarities with the European – especially the German – debt crisis in 1931. However, one can undoubtedly also learn a lot from studying the Argentine crisis of 2001-2002 and the eventual Argentine default in 2002.

What this crises have in common is the combination of rigid monetary regimes (the gold standard, a currency board and the euro), serious fiscal austerity measures that ultimately leads to the downfall of the government and an international society that is desperately trying to solve the problem, but ultimately see domestic political events makes a rescue impossible – whether it was the Hoover administration and BIS in 1931, the IMF in 2001 or the EU (Germany/France) in 2011. The historical similarities are truly scary.

I have no clue how things will play out in Greece, but Germany 1931 and Argentina 2001 does not give much hope for optimism, but we can at least prepare ourselves for how things might play out by studying history.

I can recommend having a look at this timeline for how the Argentine crisis played out. You can start on page 3 – the Autumn of 2001. This is more or less where we are in Greece today.

I wrote that back in 2011. It has been four more years of economic and social pain for the Greek population so you got to ask yourself – just how bad can the alternative be?

And finally a – highly speculative – note: If we in fact get Grexit then my forecast is that we will have a couple of quarters of negative GDP growth (as a result of the bank run we already have seen), but then Greece will see the mother of all recoveries as the New Drachma plummets (likely 70-80%).

This will be the positive result of ending the monetary strangulation of the Greek economy. However, structurally and politically it is hard to be positive – and hence Greece will then again within the next decade face another crisis likely in the form of weak growth and this time around high inflation as public finance problems will likely remain unsolved. At least this is how it played out in Argentina…

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