No it is more direct than that. A lot of banks have debt with them and some without knowing. If the debt defaults they will lose that money. This has mainly been resolved in that they have basically agreed to take less money so the majority of the default has already happened or been arranged. The problem is when the default spreads to other PIIGS then people will lose their money. In short Greece is not that bad on its own but it will be joined soon by other states.
Lets see the problems: 1) Euro denominated contracts with the Greek private and public sectors 2) Greek banks are wiped out. Greek sovereign debt defaults. Foreign banks will take a hit. What about credit default swaps?? 3) As the above post suggests, fear of the next country to leave and the process repeats. I don't buy the rhetoric coming from Germany that a Greek exit wouldn't be that bad. Opening the ark of the covenant probably wasn't viewed as a bad idea until those spirits came out and faces started melting. Face melt coming to a financial market near you.
You guys really need to read my book. You can get it for next to nothing on kindle now as a promotion. http://www.amazon.com/Aggregate-Eur...s=digital-text&ie=UTF8&qid=1337110431&sr=1-12
You can get it for free at the amazon lending library. It is on KDP Select. Go an borrow it for free at amazon
What I don't understand is if the weaker states like Spain, Portugal, and Italy leave the Euro shouldn't that make the euro a more valuable currency? Can't they be responsible for their own debt tied to their own currency? That way if they default they only hurt themselves and the people holding their debt. I guess that's the same thing, since its the stronger states that are supporting them through the IMF. I guess their F**cked
No there is a debt contract that will collapse that means all the money they owe in Greece will not be paid. That means people with money in the bank could lose the money and then they will not be able to use the money. Also loads of people will lose their pension. One persons debt is another persons asset.
The stronger states owned the debt. So if the weaker ones default they lose their investments. In short if the PIIGS default people all over the world will lose their savings, pensions etc. What do you all think that the money you have in the bank just sits there and they pay you money for that each year? The money is lent to people who have to pay it back. The people who have been lent the money will be the people who are heavily in debt namely the high debt countries like the PIIGS. In short it is not just the PIIGS economies on the line it is your savings and pensions.
Ya but don't they don't just lend without collateral, do they? Should we never trust the credit worthiness of any gov't? How do you measure that?