Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21
Last Chance to GET FREE Money Crypto Mining with Your Desktop PC - 2nd May 21
Will Powell Lull Gold Bulls to Sweet Sleep? - 2nd May 21
Stock Market Enough Consolidation Already! - 2nd May 21
Inflation or Deflation? (Not a silly question…) - 2nd May 21
What Are The Requirements For Applying For A Payday Loan Online? - 2nd May 21
How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part1 - 1st May 21
INDIA COVID APOCALYPSE - 1st May 21
Are Technicals Pointing to New Gold Price Rally? - 1st May 21
US Dollar Index: Subtle Changes, Remarkable Outcomes - 1st May 21
Stock Market Correction Time Window - 30th Apr 21
Stock Market "Fastest Jump Since 2007": How Leveraged Investors are Courting "Doom" - 30th Apr 21
Three Reasons Why Waiting for "Cheaper Silver" Doesn't Make Cents - 30th Apr 21
Want To Invest In US Real Estate Market But Don’t Have The Down Payment? - 30th Apr 21
King Zuckerberg Tech Companies to Set up their own Governments! - 29th Apr 21
Silver Price Enters Acceleration Phase - 29th Apr 21
Financial Stocks Sector Appears Ready To Run Higher - 29th Apr 21
Stock Market Leverage Reaches New All-Time Highs As The Excess Phase Rally Continues - 29th Apr 21
Get Ready for the Fourth U.S. Central Bank - 29th Apr 21
Gold Mining Stock: Were Upswings Just an Exhausting Sprint? - 29th Apr 21
AI Tech Stocks Lead the Bull Market Charge - 28th Apr 21
AMD Ryzen Overclocking Guide - 5900x, 5950x, 5600x PPT, TDC, EDC, How to Best Settings Beyond PBO - 28th Apr 21
Stocks Bear Market / Crash Indicator - 28th Apr 21
No Upsetting the Apple Cart in Stocks or Gold - 28th Apr 21
Is The Covaids Insanity Actually Getting Worse? - 28th Apr 21
Dogecoin to the Moon! The Signs are Everywhere, but few will Heed them - 28th Apr 21
SPX Indicators Flashing Stock Market Caution - 28th Apr 21
Gold Prices – Don’t Get Too Excited - 28th Apr 21
6 Challenges Contract Managers Face When Handling Contractual Agreements - 28th Apr 21
Corsair H150i Pro iCUE Firmware Update Says Bye Bye - H100i, H115i, Bricked Jet Engine Fans Fix - 27th Apr 21
Bude Cliff Walk and Secluded Pebble Beach Tour in VR 360 - Cornwall UK Holidays 2021 - 27th Apr 21
The Top 3 CBD Oils with Anti-Inflammatory Properties for Stopping Pain - 27th Apr 21 -
Biden’s Green New Deal - 27th Apr 21
Gold Stocks Upleg Accelerates - 27th Apr 21
The Tax Plan to Slay the Stocks Bull Market? - 26th Apr 21
See What’s Next for European Markets - 26th Apr 21
Gold's Perfect Storm - 26th Apr 21
Biden’s ‘Green Reset’ Could Be Great for Silver - 26th Apr 21
SPX Stock Market Short Squeeze – Here Or Not? - 25th Apr 21
Fiscal Guilt: What a Shift in Monetary Policy Portends for Investors - 25th Apr 21
Gold Price Reversal? Have No Fear! - 24th Apr 21
No Fear Of Inflation; Threat Of Deflation - 24th Apr 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Atlantic Ocean No Barrier to Greece Debt Contagion

Economics / Global Debt Crisis May 07, 2010 - 11:04 AM GMT

By: Pete_Grant

Economics

As the price tag for the EU/IMF bailout for Greece has steadily grown over the past several months and contagion within the euro-zone has commenced, US investors are beginning to realize that the widening European sovereign debt crisis may indeed have some significant implication on our side of the pond.


While Europe scrambles to quarantine Greece with a proposed $150 bln bailout, the market remains extremely skeptical of the odds of success.

Greece is indeed just the tip of the iceberg, and whether the end-game is triggered by a sovereign default or a bailout -- the die is cast at that point -- there will either be a series of defaults or a series of bailouts within the Eurozone.

The outcome for either scenario could be equally dire. In fact, whether it's default or bailout, the potential is for an economic crisis far larger in scope than the 2008 US banking crisis.

The so-called PIIGS nations (Portugal, Ireland, Italy, Greece and Spain) have about $600 bln in funding needs this year alone according to Bank of America. Total financing needs for the PIIGS over the course of the next three years is nearly $2 trillion. The total debt of these countries is a staggering $3.9 trillion, according to a recent New York Times article.

Europe bares the brunt of this risk, due to the complex web of financial interconnectedness that has emerged in the region over the past decade, but the risks certainly don't end there. The pain may be initially contained, but if the large French, Swiss and British banks start feeling the pinch, it's just a matter of time before that pain gets exported to America.

Click here for an excellent graphic depiction of the aforementioned web of interconnectedness.

A Barclays Capital report back in February indicated that US banks had about $176 bln in exposure to Greece, Portugal, Spain and Ireland. Most of that risk being concentrated at the top-ten largest US banks; those likely still considered "too-big-to-fail."

More recently, Wells Fargo reported that JPMorgan -- the second largest US bank -- has exposure to the PIIGS totaling 28% of its Tier-1 capital. For Morgan Stanley, that risk is a whopping 69% of Tier-1 capital.

Tier-1 capital is a bank's core capital, including equity capital and disclosed reserves. It's not hard to imagine, that if a large chunk of core capital suddenly became illiquid and perhaps even worthless, US banks would be sprinting back to the government till, looking for yet another bailout of their own.

As perhaps a holdover from the World Wars, Americans still seem to view the Atlantic Ocean as an effective buffer against the woes on the Continent. Given how effective we were at exporting our sub-prime mortgage crisis across the Atlantic to Europe, it's naïve to think that a European sovereign debt crisis won't work its way to our shores.

A truly unquantifiable aspect of this developing crisis is the 'fear factor' -- be it rational or irrational. Fears are unquestionably mounting in Europe and when markets react to fearwell, anything can happen.

Pete Grant, Senior Metals Analyst, Account Executive
USAGOLD - Centennial Precious Metals, Denver

For more information on the role gold can play in your portfolio, please see The ABCs of Gold Investing: How to Protect and Build Your Wealth with Gold by Michael J. Kosares.

Pete Grant is the Senior Metals Analyst and an Account Executive with USAGOLD - Centennial Precious Metals. He has spent the majority of his career as a global markets analyst. He began trading IMM currency futures at the Chicago Mercantile Exchange in the mid-1980's. In 1988 Mr. Grant joined MMS International as a foreign exchange market analyst. MMS was acquired by Standard & Poor's a short time later. Pete spent twelve years with S&P - MMS, where he became the Senior Managing FX Strategist. As a manager of the award-winning Currency Market Insight product, he was responsible for the daily real-time forecasting of the world's major and emerging currency pairs, along with gold and precious metals, to a global institutional audience. Pete was consistently recognized for providing invaluable services to his clients in the areas of custom trading strategies and risk assessment. The financial press frequently reported his expert market insights, risk evaluations and forecasts. Prior to joining USAGOLD, Mr. Grant served as VP of Operations and Chief Metals Trader for a Denver based investment management firm.

Disclaimer: Opinions expressed in commentary e do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. Centennial Precious Metals, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD - Centennial Precious Metals does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.

Michael J. Kosares Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in