June 29, 2015

One View on Greece

The view on Greece as I observe is that the resources of information are split between those that relish a lose/lose narrative and those that are unsure, resulting in unclear messages. My view is that Greece is an anomaly, not a catastrophe, the former providing an excuse for a much needed correction. That said, consider the pieces of this unsavory pie.

Debt – Greece has a lot of debt. Inability to pay off debt is a problem but so is the demand by creditors, both international and national, for more austere measures such as cutbacks in government pension’s outlays and changes in certain social/employment conditions. The latter common even to the US as we debate the merits of changing the retirement age or competing tax philosophies. As of this comment the Greek government has balked at the demands and creditors are holding their ground, a condition that could result in Greece exiting the European Union. In the meantime other countries have suggested temporary aids, including China and Russia. All these are at the center of uncertainty gripping the region and the global stock markets.

Currency – As a member of the EU a default by Greece would have a negative effect on the EU currency and its relationship to Asia and the US. For the US a stronger dollar at a time when the economy is only modestly growing is, in my opinion, a challenge to our markets although no bigger than the problems facing Europe. But because the global economies, particularly in the west, are economically intertwined sympathetic declines in stock markets cannot be discounted.

External Influences – The now familiar expansion of aggressions in the Middle East, the launch of the Asian Infrastructure Investment Bank, a trade and commerce entity to compete with world banks and outstanding trade agreements. At home Federal Reserve Bank sending mixed signals as to when interest rates will officially rise. Each of these items still have a different effect on global growth, in particular the allocation of resources, but mostly their uncertainty fuels volatility.

So, my focus on Greece is the potential of a default on its debt and the subsequent result of that outcome (i.e. exit the Euro Community).  However, opportunity is often found in the wreckage of economic excess, but even without the name calling, nationalistic posturing and endless political opportunism I remain cautious while on the lookout for it. And whatever the outcome the global economy will find a way to absorb the problems that arise, none of which, in my opinion, are as severe as those faced in the recent global financial crisis.