Why does Greece need its own currency? Just default on its euro debt and use some other currency for its money. Turkish lira would also work.

Going back a few years, someone from Argentina mentioned life during the collapse. Well, first there were merchants changing prices all day. Then everyone stopped working. Anyhow, the poster got robbed by a charming old couple that said hello and then the old lady pulled out a handgun.

Not sure what the inflation adjusted GDP did but I know things got pretty rough for a while. So, don't sell this as a good time.

Paul - do US dollars grow on trees? Where would Greece get them? It would be just the same problem as with the Euro. The virtue of having your own currency is that you can use it to run your economy productively, fully employing your resources, without needing to beg, borrow or trade. The currency issuer is the real ruler of an economy. The ECB is the unelected monarch of the Eurozone. The individual states like Greece are puppets, satrapies, with the big states' (Germany with junior partner France) main power lying in their control over the ECB & monetary policy.

James: Nobody is selling default as a picnic. But it's a lot better than austerity, which is just endless, pointless torture, designed for the relative, not absolute enrichment of a very, very few.

Calgacus writes,

The ECB is the unelected monarch of the Eurozone. The individual states like Greece are puppets, satrapies, with the big states' (Germany with junior partner France) main power lying in their control over the ECB & monetary policy.

Greece suffered (still does?) widespread tax evasion, and it essentially defrauded the EU as to its public solvency. I'm not saying it or its people deserve to suffer as a result--far from it, the populace are the victims of its own one percent--but no one forced it to adopt the Euro, and its government has shown little interest in taxing Greece's wealthy or even collecting back taxes via amnesty as Dean has suggested in the past. Even if it reintroduces the drachma, it might not solve its revenue problems.

James I don't see Dean selling it as a good time as you say. Why do you think that?

James, Dean is citing inflation-adjusted GDP.

I am saying that it is a trade off for one form of chaos vs another.

There is considerable violence when collapses occur.

Not sure how things end up for old folks and people on pensions.

I think the option that bondholders get stiffed and Greece stays in the Euro zone should be considered as well. That is the ECB eats the default and investors as well.

LSTB: Even if it reintroduces the drachma, it might not solve its revenue problems. No, it solves them the instant it adopts the drachma, using the word "revenue" as usual. Of course, you are pointing out a real problem - the taxing power may not be strong enough, Greece may not have sufficient power over its 1% to tax enough to give as much demand, as much value, for the drachmas it would spend as the 99% would like.

Of course nobody forced the Euro on Greece, but the dark age of (macro)economics that allowed the worst monetary system of all time to be created is not Greece's fault. They stupidly went along, they trusted "experts", people who supposedly KNEW BETTER - and it seemed to work for a while. The Euro is a fraud, the economics it is based on is a fraud, these "experts" & Eurocrats are frauds who understand less about economics than the average homeless bum. One can argue that Greece's & the other trade deficit state's ways are/were what was keeping the Euro going, keeping economies working relatively well, supporting Germany's macroeconomically highly destructive Euro hoarding.

Reintroduction of the Drachma would allow Greece to immediately have full employment - which is the truly important thing, and tax revenue would surely increase. The current nightmare could lead to a more socially cohesive, just society that imposed taxes more rationally and levied them more consistently.

"Reintroduction of the Drachma would allow Greece to immediately have full employment - "

This is hilarious...I am guessing its kind of Izzatso sarcasm, but seems real...wild.

It is the real value of the debt which is the issue. Not the denomination of that debt, which is irrelevant. Drachma interest rates would be substantially higher than current Euro rates. Thus, even with default on the current debt, Greece would still need to borrow in foreign currency units, whether they be Euros or Dollars or Renminbi. But ultimately they still gotta cough up some real amount of feta and olive oil and vacation stays to pay for this stuff, whatever they use for in house currency.

Following this nutty logic, why couldn't Lehman issue more shares...that's like their currency. Then they could pay off their debt with the money they raise from the shares....simple...

Reintroduction of the Drachma would allow Greece to immediately have full employment
Umm, yes, Pete. It is that simple. Full employment is very easy to attain. Of course the real value of the debt is one of the issues. Now, due to EU/Greek mismanagement, compound interest has made default a certainty. So default, the sooner the better.

Drachma interest rates would be substantially higher than current Euro rates. Not at all. Drachma interest rates would be whatever the Greek government decided them to be.

Thus, even with default on the current debt, Greece would still need to borrow in foreign currency units, whether they be Euros or Dollars or Renminbi. Baloney. A complete non sequitur. It would need to obtain Euros, Dollars, etc. to obtain necessary imports. Borrowing denominated in such foreign currencies is insane, which is why it is so common. Greece would obtain the foreign exchange by exporting.

But ultimately they still gotta cough up some real amount of feta and olive oil and vacation stays to pay for this stuff, whatever they use for in house currency. Yes. Quite. I never said different. The problem with the Euro is that it damages the Greek economy, keeps export prices high and therefore total exports low, forces enormous unemployment & inefficiency on Greece. The Euro prevents Greece from managing its economy adequately, prevents it from "coughing up". Greece on the drachma would be able to "cough up" more, though I think it would be best to default, replace euro-debt with drachma-debt at some reasonable, payable rate, and be done with it.

Following this nutty logic, why couldn't Lehman issue more shares...that's like their currency. Then they could pay off their debt with the money they raise from the shares....simple...

Nothing nutty about what I have said.
This happens all the time - capital raised by stock issuance can be use to pay off debt, if the markets consider the company to have excellent prospects. Not appropriate for Lehmann, which was broke.

But was Lehmann a country? Did it have the authority to tax? What happens if a subnational, nonsovereign entity does not pay debts? - Answer: they will go bankrupt, they will dissolve, depending on what the nation's laws and the courts say. This does not happen with countries - what happens depends on their internal laws. Lehmann was a financial entity, with no real assets, no production (the parallel to exports). Greece is a country with millions of people and valuable assets, valuable export possibilities. Drachma would have real foreign exchange value, based on Greek exports. Lehmann shares dollar value in this scenario? - next to none.

As Dean points out, Argentina has shown the way. Default, and use the power of having your own currency to do the opposite of what the IMF & the Euroscum insist must be done. (To line their pockets, that is)