History of Russian default in the light of Greece

[TimtheEnchanter]

I remember that Russia defaulted her loans. In the hindsight this was a non-event. Why cannot the EU banks take the haircut and just move on? I am sure monetarily we are talking about a larger sum, but what is inevitable IS going to happen. Can someone explain?

 

[Martinghoul]

Everything really, apart from when you croak/kick the bucket/shuffle off this mortal coil/give up the ghost/etc, is a non-event in hindsight.

 

[Covertibility]

One does not simply default on Greek debt into Mordor. Its black gates are guarded by more than just orcs. There is evil there that does not sleep. The great eye is ever watchful. It is a barren wasteland, riddled with fire, ash, and dust. The very air you breathe is a poisonous fume. Not with ten thousand men could you do this. It is folly.

 

[heech]

My understanding is that a number of nations sit somewhere on a spectrum between "solvency" problem and "liquidity" problem. Difference being, you can grow out of a liquidity problem as long as you are given time.

Greece is on the extreme, and looks like a solvency problem. They arent large, so a default makes sense for all involved. But if the European community allows a default to occur (and just capitalize banks as needed)... They now reset all of our expectations about other peripheral nations (Italy and Spain for starters), which arguably are only facing liquidity issues.

Arguably these other nations COULD grow out of their current deficit given time... but if investors flee their bonds while speculators pile on, then their borrowing costs will skyrocket. In other words, by not defending Greece, these other nations would also become insolvent. And at that point, their combined size is likely too large for the remaining richer European nations to save.