George Friedman writes: The Greek crisis is moving toward a climax. The issue is actually quite simple. The Greek government owes a great deal of money to European institutions and the International Monetary Fund. It has accumulated this debt over time, but it has become increasingly difficult for Greece to meet its payments. If Greece doesn’t meet these payments, the IMF and European institutions have said they will not extend any more loans to Greece. Greece must make a calculation. If it pays the loans on time and receives additional funding, will it be better off than not paying the loans and being cut off from more?

A strategy inspired by Budapest would have the Greeks print drachmas and announce (not offer) that the debt would be repaid in that currency. The euro could still circulate in Greece and be legal tender, but the government would pay its debts in drachmas.

In considering this and other scenarios, the pervading question is whether Greece leaves or stays in the eurozone. But before that, there are still two fundamental questions. First, in or out of the euro, how does Greece pay its debts currently without engendering social chaos? The second and far more important question is how does Greece revive its economy? Lurching from debt payment to debt payment, from German and IMF threats to German and IMF threats is amusing from a distance. It does not, however, address the real issue: Greece, and other countries, cannot exist as normal, coherent states under these circumstances, and in European history, long-term economic dysfunction tends to lead to political extremism and instability. The euro question may be interesting, but the deeper economic question is of profound importance to both the debtor and creditors.  Repaying the Greek Debt

In the Economist:  China’s premier is fond of saying that the government has plenty of tools in its toolbox to combat the economy’s slowdown. Rummaging through the kit, the central bank produced a big wrench on Sunday: a 1 percentage-point reduction in the amount of cash that lenders must lock up as reserves. It is the largest cut in Chinese banks’ required reserve ratio (RRR) since late 2008, the nadir of the global financial crisis. It frees up nearly 1.3 trillion yuan ($210 billion) for new lending, money that should help shore up growth. It is likely, however, to also pour fuel on an already-sizzling stockmarket.

Judging by economic data alone, the move comes as little surprise. Nominal growth in the first quarter slumped to 5.8% from a year earlier, the lowest since the first quarter of 2009. Factory production is weak, lending growth has slowed and deflation is beginning to rear its head. China launched its easing cycle last November (it has cut interest rates twice and RRR once since then), and Mr Li has pledged to do more to support growth if needed. Additional policy easing seemed a foregone conclusion after all the sluggish recent data.

But the timing of the cut is something of a surprise. Required reserves play little role in the monetary policies of developed economies. In China, however, they have formed a crucial component of the framework for keeping the yuan steady. In the past, when foreign cash streamed into China via its trade surplus and amid speculative inflows, the central bank printed billions of yuan every month to soak up the flood. That would normally have been expected to cause inflation, but the central bank counteracted the effect by forcing lenders to lock up a large portion of the resulting cash as reserves. At its peak in 2011, China’s RRR reached 21.5%, a level with little precedent in other countries.

While China is still running a hefty trade surplus, speculative flows have become much more volatile. Cash enters the country some months and leaves it other months. With reduced inflows from abroad, the central bank no longer needs to intervene so heavily in the currency market. But it does need to come up with new ways of creating liquidity for the financial system. The most obvious is to normalise monetary policy by cutting RRR. Even with Sunday’s reduction, the ratio for the biggest banks sits at 18.5%—amounting to more than 20 trillion yuan worth of cash. Mr Li’s toolbox is far from empty.

Nikos Chrysoloras and Eleni Chrepa write:  Running out of options to keep his country afloat, Greek Prime Minister Alexis Tsipras ordered local governments to move their funds to the central bank.

With negotiations over bailout aid deadlocked, Tsipras needs the cash for salaries, pensions and a repayment to the International Monetary Fund. Greek bonds fell after the move, pushing three-year yields to the highest since the nation’s debt restructuring in 2012. The order was questioned by local officials and slammed by the leading opposition party.

The decree to confiscate reserves now held in commercial banks and transfer them to the central bank could raise about 2 billion euros ($2.15 billion), according to two people familiar with the decision. The move, reminiscent of step that cash-strapped Argentina has taken over the past decade, shows how time is running out for Tsipras, a point made by European officials who addressed the matter at IMF meetings in Washington in recent days.

A default on the country’s 313 billion euros of obligations and a euro exit would be traumatic for the currency area and plunge Greece into a major crisis.

The new funds may be just enough for salaries and a 770 million-euro payment to the IMF due on May 12, the people said.

The move is a sign of the “dire liquidity situation for the Greek financial system as the government pools all liquidity available,” said Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers LLP in London. The “next step may be forcing all public-sector entities, including public-sector companies to do the same,” he said.

Greece and its creditors remained at loggerheads with time running out. The sides haven’t even set 2015 budget targets, let alone policies to meet them, an official representing creditors said Monday, asking not to be named as talks aren’t public.

European leaders want Greece to do more to revamp its debt-burdened economy, with progress to be reviewed on April 24 in Riga, Latvia, when finance ministers from the currency bloc meet. European Commission Vice President Valdis Dombrovskis said in an interview in Washington that creditors might need to wait until mid-May to see what

“The situation with Greece needs to be resolved soon,” Cypriot Finance Minister Harris Georgiades said.

Greek officials, including Deputy Prime Minister Yannis Dragasakis, remained defiant saying the government won’t betray its electoral promises and worsen the pain that came from previous austerity measures.

While “so-called” partners, including unidentified IMF officials, want to “blackmail” Greece into adopting measures that would hurt the working class, “we won’t betray the people’s mandate,” Energy Minister Panagiotis Lafazanis said, according to an interview published in Athens-based Real News newspaper.

Stefan RiecherBirgit Jennen writes:  The leaders of Germany’s economy fired back at U.S. criticism of their swelling current-account surplus, arguing it reflects the strength of their companies and the weakness of the euro rather than a lack of domestic demand.

“It would be absurd to discuss whether German competitiveness should be reduced to narrow the current-account surplus,” Bundesbank President Jens Weidmann said in Washington on Friday.

There has been a drumbeat of complaints this month from the U.S. that the surplus, now topping 7 percent of gross domestic product, is a fault line in the global economy and that Chancellor Angela Merkel needs to pare it by stimulating demand at home. Both the U.S. Treasury Department and former Federal Reserve Chairman Ben S. Bernanke have made that case, implying criticism of Germany’s bias towards tight fiscal policy.

“Stronger demand growth in Germany is absolutely essential, as it has been persistently weak,” the U.S. Treasury Secretary Jacob J. Lew said in the department’s semiannual report on foreign-exchange policies, which it published last week.

Bernanke used his recently begun blog to say “in a slow-growing world that is short aggregate demand, Germany’s trade surplus is a problem.” He advised Merkel’s government to act to raise infrastructure spending and wages.

“The fact that Germany is selling so much more than it is buying redirects demand from its neighbors (as well as from other countries around the world), reducing output and employment outside Germany at a time at which monetary policy in many countries is reaching its limits,” Bernanke said.

Also speaking in Washington, Finance Minister Wolfgang Schaeuble blamed the surplus on exchange rates as a declining euro makes products from companies such as carmaker Volkswagen AG cheaper in the international marketplace.

“When I have to defend the surplus, which I do sometimes these days, I point out that the exchange rate contributes to the surplus,” Schaeuble said.

Weidmann said “the depreciation of the euro of course plays a role because German products have become cheaper abroad as a consequence.”

One of Time Magazine’s 100 Most Influentail People:

Former US Senator Bill Bradley writes:  I met Mellody Hobson when she was a senior in high school at a breakfast for Chicago business elite. Quite frankly, I don’t remember any of the Chicago business elite, but I did remember Mellody because she made such a deep impression.

Mellody is determined, disciplined and enormously curious. I’ve seen her abilities manifested in the boardroom at Starbucks, where we both serve. She’s always very direct. You do not have to wonder what Mellody’s opinion is. She also has a deep commitment to improving financial literacy among moderate and low-income Americans.

From her efforts as president of Ariel Investments to her work in my presidential campaign, Mellody exudes a cheerful confidence that makes people want to follow her. She has said her goals are to do well, surrounded by interesting people, and change the world for the better. Since she’s already doing those things now, just imagine what the next 30 years will bring.