Via Pethokoukis@AEIdeas, June 29:
Over time, a Greek exit could impose significant economic and geopolitical costs on the United States. This could occur through the following three channels. Again, from AEI’s Desmond Lachman:
1.) In the immediate aftermath of a Greek exit, one must expect a significant further depreciation of the Euro as the ECB took more forceful measure to prop up the European periphery and as investors fled to the safety of the dollar. This would have the effect of causing a further effective appreciation of the dollar that would come on top of a 15% such appreciation over the past year. As the Federal Reserve has noted, a strong dollar appreciation could constitute a significant headwind to the US economic recovery and could exert significant downward pressure on US headline inflation.
2.) Any eventual spread of the Eurozone debt crisis to other countries in the European periphery, like Italy, Portugal, and Spain, could roil global financial markets and dent European household and investor confidence....MORE
