Eurozone countries are like a group of climbers roped together: Remember where you read this allegory first?

The Financial Times today reports on something John Wraith, fixed income strategist at BofA Merrill Lynch, said regarding the manner in which contagion is spreading within the eurozone economies. “It is like a group of climbers roped together. As Greece slips, it pulls down other countries such as Spain and Italy.” Precisely. But readers of this blog will remember where they read this allegory first. Yes, it was here, a post that appeared in this blog  on 7th January under the title No More Domino Metaphors for the Euro Crisis: Mountaineering ones only from now on.

Good to know that I am read by market players. Not so good that they do not feel the need to quote. Still, I suppose this is the least of our concerns regarding the markets and their participants.


  • Sorry, dude, but you weren’t first. Edward Hughes used the same image last September. And he described it then as a “popular analogy now circulating,” so lots of people must have used it before him.

    In any case, popular it may be, but it’s not very accurate. Our metaphorical climbers have a powerful winch to haul the danglers back up, in the form of the ECB. As you know, ECB purchases of government debt during the crisis have dwarfed the public-sector borrowing requirements of the crisis countries. During the crisis period, the ECB increased its holding of Euro area government securities by about E160 billion annually, or two-thirds the *total borrowing* of all five PIIGS countries. There’s no question that if the ECB were willing to undertake the equivalent of the Fed’s QEII, it could fully resolve the crisis. Obviously there are enormous political obstacles, as you’ve written about in previous posts here. But it’s not helpful, I don’t think, to pretend that this problem is hard to solve technically.

    • Nothing new under the sun then (my first use of the, quite obvious, mountaineering analogy) appeared in August 2010 in a Greek article. But I take your point: it was probably used widely. On matters of substance, you are precisely right: The ECB could stop the crisis in its tracks by means of a variant of QE. Technically there would be no problem. Our Modest Proposal has, in this context, two purposes. First, to offer both the ECB and our politicians a way out of their phobias (since the tranche transfer would be revenue neutral). Secondly, to allow for the energising of the European Investment Bank (by means of the net eurobond issues) as a surplus recycling mechanism that will ameliorate for the internal imbalances which will otherwise lead to a fresh crisis in the future.

  • Someone else borrowed your Buridan`s Ass comparison last week concerning the euro-zone crisis.

  • Absolutely agreed on your Modest Proposal. I’m just doubtful about whether a rhetoric that presents the European financial crisis as intractable is helpful in moving the debate in that direction. But you presumably are much closer to the relevant conversations than is an American graduate student like me…

  • What makes you think that the error is in the privatization and not in the “representative” aspect of modern democracy?
    This is not to say that I favor privatization – on the contrary. But, I think that this is just a symptom inherent in the representative democracy – which by the way seems to me rendered obsolete. I mean, the notion of “welfare state” has substitute that of “democracy” (albeit as an aftermath of the first).

    Now, in 21st century, “welfare state” and “democracy” are vitally coupled. Certain systems target at destroying this coupling – in vein of course (it is a bond in cultural memory). So, I think there’s no point in defending what does not want to be defended (in a manner of speaking), but designing the next evolutionary step….

    • There is a proound difference between (a) privatisation carried out by a powerful elite that has managed to capture government through democratic processes and (b) privatisation carried out by a committee of foreign, unelected creditors who decide what will be sold, at what price and who will get the proceeds…