How did we even get here?
Europe got here by letting Greece and other countries lie about their government debt/GDP ratio. This was supposed to be part of the deal for Euro membership – that you’d stick to the agreements about not building up too much debt – which would threaten the value of the euro. Greece isn’t the only one. Spain and Portugal and Italy constantly lie about growth and tax revenue and debt.
Why do we care so much? Greece’s economy is teeny tiny, isn’t it?
We care about Greece because if it gets away with not paying its bills, a lot of other Euro countries, like Spain, Italy, Portugal and Ireland will say: “Why should we pay if Greece doesn’t have to?” And if that happens, the $353 billion owed by Greece will be multiplied many times and add up to more trillions than the banks and other bondholders could afford.
How is the Greek debt crisis affecting the US economy?
So far the only major way this has affected the U.S. is in companies and banks that deal with Greece. But if the Obama Administration continues to lobby on behalf of the Tsipras government – which it has done for several weeks now – we could see pressure put on the IMF to dole out more money, a lot of which has been ponied up by U.S. taxpayers.
Is there anything we can do? What about our government?
What we can do is put pressure on the IMF NOT to pay out taxpayer dollars to bail out the banks and other bondholders…again!
So just how messy is it out there? What does the crisis mean for American consumers and investors?
So far stocks are still high and rates still low. Investors have too much invested in the market to sell out quite yet. The greed factor is very much in play. Even some CEOs think their companies’ share prices are too high. Netflix CEO Reed Hastings just said: “When the stock was half this price I described it as euphoric. So it’s a mystery to me.” Me too, Reed! Me too.
What happens next?
What happens next is more of the same. More bailouts. More money being printed to pay for the bailouts. And a bigger bubble. Whether it can be deflated before it pops will mean the difference between a correction and a tough recession for U.S. consumers and investors.
To learn more, head over to Wall Street Survivor.