Haircuts grooming Tailoring

Haircuts for military personnel

Do you think these haircuts have come to stay?

I can't come earlier. My boss says, at the front they don't even get breaks for haircuts.

That way, formal haircuts on the face value of debt can be avoided via new bonds that include only a maturity extension and an interest rate cap that is set below today s unsustainable market rates. Waiting to restructure unsustainable debts would only lead to disorderly workouts and severe haircuts for some private creditors.

Subsequent programs to deal with emerging market crises featured an analogous combination of country adjustment and private sector involvement. Voluntary debt exchanges worked, roughly speaking, with investors accepting haircuts.

These two structural changes may not be sufficient to provide the eurozone countries in need of rescue an escape route from their predicament. Additional measures, such as haircuts for holders of sovereign debt, may be needed.

The Troika s claims on Greece need not be reduced in face value, but their maturity would have to be lengthened by another decade, and the interest on it reduced. Further haircuts on private claims would also be needed, starting with a moratorium on interest payments.

But if that were the problem, one would cause all prices including, say, clothing and haircuts to rise. That is what the Federal Reserve Chairman Arthur Burns meant when he said that the United States was awash with liquidity in 1971, a period when the concern was general inflation.

At a court hearing this week, Calais authorities had argued the state should be able to knock down a total of 72 makeshift shops where people inside the camp sell goods, from cigarettes to energy drinks, offer haircuts, or sell tea for 50 cents (40p) or basic meals for a few euros in makeshift restaurants.

Given policymakers reluctance to contemplate write downs, specifically of debt held by official lenders, governments have been forced to levy high taxes to service their obligations, in turn depressing investment. It would be better to give the European Stability Mechanism, the ECB, and other official holders of sovereign debt the haircuts that they deserve.

The German proposal, spearheaded by Finance Minister Wolfgang Schäuble, highlights the fundamental change that has occurred in Greece s relationship with its European partners since its last bailout package three years ago. In 2012, Greece was offered hundreds of billions of euros in financial support, and its creditors, including Greek commercial banks, were pushed to accept substantial voluntary haircuts.

Similarly, although the one size fits all monetary policy contributed to Greece s excessive indebtedness, and to Spain s real estate bubble, eurozone leaders have consistently sought to re align interest rates, for example, by compelling holders of Greek debt to accept haircuts (write downs on principal). But the impact is severely limited without external devaluation, which is impossible within a monetary union.

If these debt free savers are in New York City, which did not experience as much of a boom and a bust, cutting real interest rates will encourage spending on haircuts in New York City, which already has plenty of demand, but not in Las Vegas, which has too little. Put differently, real interest rates are too blunt a stimulus tool, even if they work.