You all probably already know this, however I was a little foggy so I looked it up. How does small little greece effect our stock market and everyone else's? Please note how the copy and paste ends....destroy the entire world wide financial system.
Also, are we so naive (humans) that we would set up entire economies that provide nations with their jobs, food, basic stuff...in such a delicate manner? It is frustrating growing up in a world where your forefathers are so incredibly dumb. Seriously there has to be a better way!
Greece is a small country thousands of miles around the world with which we do a small amount of business (comparatively). Portugal is closer to Greece and together they do a larger portion of business. Spain is a more robust economy with dealings in Portugal and Greece.
As governments, each of these countries probably owns Greek bonds and other Greek investments. Banks in each of these nations have loaned money to Greece, both to the government and businesses in all likelihood. If Greece defaults on the amount of money that it owes, these two nations and their banks suffer a loss.
Banks all over the world are already doing a high wire act to enable their institutions to survive. Add in a default by the Greek government, and it triggers a default by several banks (for example in Portugal), followed by a default by Portugal’s government, which leads to trouble for Spain’s banks, followed by trouble for the Spanish Government, followed by Germany and France, followed ultimately at some point by the United States. The U.S. stock markets were contemplating this game of dominos last week, when drops of 10% and more occurred.
But Monday the U.S. Market was trading up markedly. What happened?
Over the weekend, the European Union and the International Monetary Fund (which the United States is the largest shareholder and financial backer of last resort) promised to fund a bailout of these weak European Nations so that the game of dominos doesn’t take place and destroy the entire world wide financial system.
