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Global financial markets face a day of reckoning on Monday if the Greek referendum goes against another austerity package and bailout, and supports its government with a ‘no’ vote. Polls are running 50:50 so this is just too close to call and a major risk.
It is astonishing how remarkably stable markets have been ahead of this event with the vast majority assuming that if Greece exits the euro it will be bad for Greece but not important for the rest of the world.
Grexit warning
British finance minister George Osborne warned earlier last week that it would be a great mistake to underestimate the impact of the so-called ‘Grexit’. He is being realistic, not alarmist.
When markets fail to discount future events correctly then they have to correct accordingly. Monday would see a huge correction if Greece leaves the Grexit open as a very high probability.
Wall Street traders do not understand European politics and the byzantine world of Greek politics is beyond almost anybody outside of a small circle of insiders and eurocrats. To assume that all will go well is question of ‘extend and pretend’ and this time the crisis has gone beyond this point.
Capital controls
The capital controls imposed in Greece last week have done long-term damage to the economy and will remain for the months it will take to reach any new deal, preferably with a new government without the muddled communist objectives of the current incumbents.
In truth Greece will be sorted out but probably not without causing substantial disruption in financial markets, if nothing else be raising the yields on eurobonds to levels that inhibit economic recover and mess up quantitative easing.
Eventually there will be a ‘yes’ for Greece, in or out of the eurozone. But in the meantime the Greek government has decided a plague on all your houses and intends to bring down the rest of the world with them.
That they won’t succeed is obvious. However, to assume that a credit event this large can be born by financial markets with barely a ripple in the pond is monumentally complacent.
Black Monday
As that complacency meets a very different reality on Monday we will indeed have a black day in global financial markets, far worse than the nasty storm of the previous week.
What will that mean? Lower stock markets across the board. A flight of safety to the dollar, yen and this time gold and silver. Higher bond yields. And a lot of worries about who’s next after Greece.
These days are often known later as a Black Monday.
http://www.arabianmoney.net/gold-silver/2015/07/04/another-black-monday-if-greek-referendum-says-no/
It is astonishing how remarkably stable markets have been ahead of this event with the vast majority assuming that if Greece exits the euro it will be bad for Greece but not important for the rest of the world.
Grexit warning
British finance minister George Osborne warned earlier last week that it would be a great mistake to underestimate the impact of the so-called ‘Grexit’. He is being realistic, not alarmist.
When markets fail to discount future events correctly then they have to correct accordingly. Monday would see a huge correction if Greece leaves the Grexit open as a very high probability.
Wall Street traders do not understand European politics and the byzantine world of Greek politics is beyond almost anybody outside of a small circle of insiders and eurocrats. To assume that all will go well is question of ‘extend and pretend’ and this time the crisis has gone beyond this point.
Capital controls
The capital controls imposed in Greece last week have done long-term damage to the economy and will remain for the months it will take to reach any new deal, preferably with a new government without the muddled communist objectives of the current incumbents.
In truth Greece will be sorted out but probably not without causing substantial disruption in financial markets, if nothing else be raising the yields on eurobonds to levels that inhibit economic recover and mess up quantitative easing.
Eventually there will be a ‘yes’ for Greece, in or out of the eurozone. But in the meantime the Greek government has decided a plague on all your houses and intends to bring down the rest of the world with them.
That they won’t succeed is obvious. However, to assume that a credit event this large can be born by financial markets with barely a ripple in the pond is monumentally complacent.
Black Monday
As that complacency meets a very different reality on Monday we will indeed have a black day in global financial markets, far worse than the nasty storm of the previous week.
What will that mean? Lower stock markets across the board. A flight of safety to the dollar, yen and this time gold and silver. Higher bond yields. And a lot of worries about who’s next after Greece.
These days are often known later as a Black Monday.
http://www.arabianmoney.net/gold-silver/2015/07/04/another-black-monday-if-greek-referendum-says-no/
