From the pen of my friend Nouriel Roubini over the weekend. This is about ten pages of thoughts on why Greece should leave the euro and what it would look like. Very well done and a different take from that of UBS. These two together are bookends of the argument that is ongoing. I tend to agree (and have for some time) with Nouriel's view that Greece should exit, a la Iceland; but there is no real assurance that the emotional pull of the euro experiment won't win out. From his conclusion, where he argues that "A Break-Up Is Painful and Costly, but a Rotten Marriage Is Worse: A Plea for an Orderly Divorce": "We don’t want to minimize the risks of default/exit for Greece. In Argentina, the economy turned from a free-fall depression—with GDP falling at an annual rate of almost 20% at the end of 2001—to positive 8% GDP growth by early 2002 after default and exit from the currency board. But the transition was very ugly and costly: Riots and blood in the streets and dozens of deaths; massive social and political instability and five different presidents in one year; a deposit freeze in the banking system; capital controls; asymmetric pesification and the need to recapitalize insolvent banks; the loss of external market access; a sharp short-term rise in poverty and unemployment (before high growth rapidly cut both); inward-looking economic policies and political economy; the retardation of economic reforms; a sharp fall in inward FDI; and an overall change in economic policies toward long-term populism and policy mismanagement. So, breaking up is hard and costly to do and every country considering it should be fully aware of the risks of such collateral damage. And if a society finds such costs unbearable it should stick to the policy sacrifices necessary to avoid that painful break-up. "But we should also be aware of the important caveats to the costs and risks of breaking up. First, the resumption of rapid growth was better than a decade of depression. And, second, a decade-long depression was not a real alternative, as the same social and political instability and financial collateral damage would have occurred if the path of depressionary deflation had been pursued. So, the relevant comparison to make is to ask the question: Which social, political, economic and financial disaster would Argentina have faced if it had followed a policy of deflation and depression? Most likely, the result would have been a 1930s-style depression that would have resulted in the same social and political instability and unrest—or most likely, worse—than that which resulted from the default and exit from the currency board."