Edward Prescott: Greek euro exit will not cause major disruption

Wednesday, 04 July 2012 17:57

In an interview to RT, Nobel economics laureate Edward Prescott says the eurozone crisis started because “Germans and French lend to someone they should not lend to, to someone who should not be borrowing.” The economist believes Greece could soon ditch the euro, but it will not cause big economic disruption in the world.

“I do not think that will be an economically major event, but the disruption will be very short lived.”

Prescott sees no benefits for those who have joined the euro.

“The euro may completely collapse, the advantage of having it is symbolic. It is true that it is convenient for tourists for moving between the states, but countries that did not enter the euro have done as well or better than those that did.”

Commenting on the role of the banks in the modern economy, he says that he is “not sure why we even need banks in the fractional reserve sense. Why we need institutions that borrow from one group of people in the very short-term, demand deposits, and lend a little bit longer, or much longer.”

 

Courtesy of RT.com

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