Back to the Willem Buiter interview in Financiëele Dagblad. Here Buiter continues with some comments on Jeroen Dijsselbloem's admission that bail-ins will be the preferred vehicle for conducting rescues going forward so as not to burden the public balance sheet.
This is an extremely important point because the difference between the bailout and the bail-in is that the bail-in recognizes that private debt is the problem and that these debts need to be recognized and written down rather than shifted to the public balance sheet. Bailouts are a form of loss socialization that shifts the burden of debts rather than reducing them. And for the euro zone, this is important because the eurozone state debtors are currency users that cannot rely on the ECB to monetize their debts if they run into tr...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.