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"assuming the defaults are uncorrelated."

Um.

by Colman (colman at eurotrib.com) on Tue Mar 13th, 2012 at 10:54:33 AM EST
[ Parent ]
In a properly run economy, they are. Because the sovereign employer and investor of last resort makes sure that the macroeconomy does not go boom.

If you hand the keys to the sovereign over to right-wingers, then of course they break it. But that is not dependent on the particulars of finance theory - right-wingers break your economy because breaking countries for fun and profit is what right-wingers do.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 13th, 2012 at 11:05:36 AM EST
[ Parent ]
Analytical simplicity. The general argument still holds even with correlated defaults.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Mar 13th, 2012 at 12:33:23 PM EST
[ Parent ]

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