The Euro Trap

Given the limited options available to Greece by reason of being tied to the euro, the Greeks will need to be more imaginative to escape this crisis. Perhaps Greece could take a page out of the Goldman Sachs playbook and begin quietly shorting Greek bonds.

The problem is that deflation — falling wages and prices — is always and everywhere a deeply painful process. It invariably involves a prolonged slump with high unemployment. And it also aggravates debt problems, both public and private, because incomes fall while the debt burden doesn’t.