Saturday, February 27, 2010

Beware of Greeks Bearing Bonds

Economic and financial crises can hit virtually overnight, leaving planners unprepared to cope with the consequences. Between early January and early February 2010, the two-year yield on Greek government bonds rose from 2.8 percent to 6.2 percent, thereafter fluctuating between 4.4-6.1 percent. The immediate fate of the Greek economy hangs in the balance of its ability to sell bonds in the coming weeks. Ditto, though less so, for the euro, Spain and Portugal.

Much as America’s officialdom treated the subprime mortgage problem in 2007 as a small matter, which escalated into a near meltdown of the entire financial system, so too maintaining unaffordable social market economies in Europe was seen to pose a small fiscal and economic threat. Disregard by European officialdom, expressing supreme confidence in the social market (big government), now threatens to scald millions. Even if Greece gets immediate help from Germany, France, and other eurozone countries, its fiscal crisis will only be papered over, waiting to explode with greater force in the near future, perhaps with even less warning than Chile’s early morning devastating 8.8 earthquake (February 27, 2010).

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