Why Is Greece Important?
Stocks jumped on good earnings reports. Bond interest rates declined due to the Greek news. The Dollar and gold went sideways. Oil/gasoline were higher on trading.
In the news today…..
Why is Greece important to you? - well it is quite simple. The FED has given Europe $2 TRILLION, and they don’t know where it went. Yup… They can’t trace it after it was distributed within Europe. Now that amount of money makes TARP look like chump change, and it came from YOU, of course.
Greek rescue costs ballooning -. According to German officials, IMF chief Dominique Strauss-Kahn has pledged to increase Greece’s €45B aid package, committing to as much as €120B ($158B) over three years. Meanwhile, Germany’s Merkel said talks to help Greece need to speed up, with officials suggesting the terms of the aid could be finalized by this weekend. Economists at Goldman Sachs, JPMorgan and Royal Bank of Scotland suggested Europe needs to think much bigger – something like €600B ($794B) in aid or buying sovereign debt – to extinguish contagion fears sparked by Greece’s debt crisis and the recent downgrades to European countries.
Can Greece be fixed? – yes, but…. The EU, like Germany, can give Greece money, but CAN;T dictate any structural changes within Greece as forbid by the EU Treaty. BUT…. The IMF can lend money and CAN impose structural changes in Greece. Greece has proven that it can’t implement structural changes on its own – the politicians are just weak and scared and cave in. Sound familiar???
What if Greece gets worse? - it would lead to a second financial meltdown – just like the last one 18 months ago. If you look at the debor nations fundamentals, then the US, UK, and others debt should be downgraded. This is really serious stuff!!!!
Greek Interest Rates – I have talked about Greek sovereign interest rates in the past, but the following graph speaks loudly about what the market is saying about Greek national debt. Here is the 5 year Greek bond interest rates:
So what’s happening on the street in Greece? The Air Force, yes, the national Greek Air Force, went out on strike. The Minister of Defense said it was a shame. People are taking their money out of Greek banks and putting them anywhere else as the Greek guarantee to protect a depositor’s funds may mean nothing is Greece goes bankrupt. (How about the USA?)
Here are the last numbers for today:
Dow Jones 30 Industrial – 11,168 (up 123)
10 Year Treasury Bond – 3.73% (down 0.04%)
Euro – $1.3241
Gold – $1168 (down $3)
Oil – $85.21 (up $1.99)
Gasoline – $2.36 (up $0.02)