Abigail on Grexit
As if Dimon’s fall from grace wasn’t bad enough, markets are also battling with Grexit demons. ‘Grexit’ is a new word that has entered the financial lexicon along with ‘financial repression’ and ‘the great recession’.
It refers to the possibility of Greece exiting the euro. Greece is on a slippery slope to hell, otherwise known as abandoning a currency peg: think Argentina in 2002. European politicians have waffled and dithered but failed to deliver a workable solution. And now the people and the markets will have it their own way. Nouriel Roubini, the renowned bearish economist, has talked of the euro being a "slow-motion train wreck".
I recently had lunch with an intelligent banker who had an interesting perspective on Grexit. "There could be a military coup in Greece," the banker ruminated. "Remember the country had a military junta in the 1970s. The more civil unrest and political ineptitude you see in Greece, the more likely a coup is. Then the military will leave the euro, devalue the drachma and there will be a difficult few months for the Greeks. However, eventually, Greece will be so cheap that we will all want to buy holiday homes there, the construction industry will boom and the economy will revive.