It is very important to bail out Greece as opposed to allowing the country to default on its debt. Very few economists believe that allowing Greece to default would be beneficial. The biggest reason as to why they must bail out Greece is the bonds that Germany and France own. If Greece was to default on its debt French and German banks would need a bailout because of the massive losses that would occur. Allowing Greece to default would also cause devaluation of the Euro which would be detrimental to the whole European Union. The IMF will give Greece $15 billion while Germany and France will aid an additional $30 Billion all at 5% fixed interest rate. Economists believe this is enough money to aid Greece in restructuring there debt and repaying some of their old debt.
I personally feel that bailing out Greece is incredibly necessary. If the European Union let Greece default on its debt the impact would cause Ireland and Spain to do the same. Both Ireland and Spain are on the verge of being as overextended as Greece is currently.
News article from The Economist:
http://www.economist.com/world/europe/displayStory.cfm?story_id=15980711&source=features_box_main
Friday, April 23, 2010
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Friday, March 5, 2010
What is a banks required reserve
Required Reserve - a percentage of all deposits made to a bank that must be kept on hand, in the United States the required reserve is 10%.
A scary thing to note is that the required reserve amount each bank must have is not distributed equally across all of the individual bank's branches. If a run on the banks were to occur and you went to withdraw from your bank, they will not have your cash available for you to take.
A scary thing to note is that the required reserve amount each bank must have is not distributed equally across all of the individual bank's branches. If a run on the banks were to occur and you went to withdraw from your bank, they will not have your cash available for you to take.
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