Day: May 26, 2010

It’s All Greek To Me

Oh my God!  So much has been said about the crisis in Europe and most verbally the situation in Greece.  Gloom and doom is predicted…..if Greece then on to the others in P.I.G.S. and then if that why not the US going down the drain?

But what if?  What if the crisis in Greece could ultimately benefit the US?  In an article written by Derek Thompson for the Atlantic Business:

But what if Europe’s debt disaster actually works out for the United States … kind of? Tim Duy finds three reasons:

1. Capital Gains for the U.S. Scared investors are running from peripheral EU states that look like they could follow Greece into the abyss. (It’s called the contagion effect: explanation here.) Running from Europe, investors might seek shelter in US investments, driving down our interest rates and giving companies looking to hire more access to capital. Duy concludes, “the odds of sustainable recovery look better every day.”

2. No Tightening from the Federal Reserve. Some liberals and moderates are concerned that the Federal Reserve might try to prematurely tighten its monetary policy by selling assets to squeeze inflation before we’ve achieved sustainable recovery and consistent job gains. But the crisis in Europe makes it more likely that the Federal Reserve will sit tight and keep money easy. After all, a Greece default — which is all but certain — could shock high-debt, low-growth states like Portugal and Spain and send jitters throughout the global economy. The Fed, nervous about feeding those fears, will probably keep interest rates low for an extended period of time with the European debt bomb ticking.

3. Cheap Oil. A weak Euro and a stop-start European economy means cheap oil, relief at the pump for the re-emerging American consumer, and marginally higher demand for cars. An exogenous oil shock helped to pop the housing bubble in the mid-2000s. Cheap gas is an economic lubricant.

What is the possibility that the US could see some minor benefit from the crisis in Greece and possibly the rest of the EU?  What are the possibilities of other countries seeing the same?

Speculators Beware!

Inkwell Institute

International Studies Group

European Desk

The economic crisis has hit the EU rather hard, especially Greece and then there is Portugal, Ireland and Spain, all of which could be the next big problem for the EU.  Some of the countries are trying desperately to find ways to prevent a total meltdown of their economy…….one such move is by Germany’s government….

Germany pledged to impose a partial ban on so-called naked short-selling early Wednesday to ward off steep market drops.
Before a parliamentary discussion regarding the 750-billion euro rescue package German Chancellor Angela Merkel called for tougher regulations against speculators to restrict some financial trades saying that the future of the euro was at stake.

Naked short-selling involves traders selling shares or investments which they do not hold in hopes of buying them cheaper later.
Germany announced its intentions to prohibit naked short-selling of eurozone government debt and shares of major financial companies hoping other nations would follow suit.

This is a rather tame attempt to cut the legs off of predatory practices…speculators have given the world almost every depression and recession and to try and control devious and possibly illegal financial practices is one way to stop the train in its tracks.

However, there must be something to the attempt for the DOW slid 376 points on the news of the attempt by Germany…..looks like the speculators were trying to get out before they were caught with their pants down.

Keep in mind that speculation caused the economic bubble in Japan to burst……speculation caused the American economic bubble to explode and now China is looking at the problem of speculation….will their economy be the next busted bubble?