The stock market has been on a roller coaster the past couple of weeks, and much of the news centers on the latest developments in the Greek debt crisis as the cause.
Greek debt was downgraded to below investment grade status by Standard and Poor’s in April of 2010. That was 18 months ago! If they defaulted tomorrow, would that really be such a surprise to anyone at this point?
Any bank holding Greek debt has to have done something by now - write it down, boost reserves, raise capital, or sell. All the governments have run numerous scenarios and developed contingency plans within contingency plans.
Will the financial system topple because of something we have seen coming for the past year and a half?
My understanding is that Lehman caused an issue in large part because it was unexpected, in at least two ways - the extent of their problems, and the decision by the US government to let them fail.
We are not surprised by Greece’s debt problems at this point. Perhaps there is still a lingering expectation that governments will step in to prevent a failure, but that cannot conceivably be a 100% expectation, can it?
If it’s something else we need to be concerned about (and that could very well be), let’s start focusing on that rather than hiding behind an 18 month issue.
It’s time we moved on.
I would love to hear your thoughts about Greek debt or your stories on this topic if you have them.
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