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Will Greece Debt Crisis Lead to Another Global Financial Crisis?

Written by Dennis Ng on .

Welcome to the 131st Issue of Weekly e-newsletter by This week I like to share with you "Will Greece Debt Crisis lead to Another Global Financial Crisis?”

The last few days, Global Stock Markets have been falling, over fears of the Greece Debt Crisis.
Let’s analyse the situation to see whether would Greece Debt Crisis lead to another Global Financial Crisis, like the sub-prime Crisis.
First, let us know who are the Top 5 countries in terms of Economy in the World, they are namely U.S. 21%, China 12.5%, Japan 6%, India 5% and Germany 4%. These 5 countries combined, constitute 48.5% of the World Economy.
Let’s look at the 4 weakest European countries, other than Greece, which is already in trouble and Credit Rating now “junk status, the rest are Portugal, Ireland and Spain, their current Credit Rating are all A- or BETTER, or at least 3 Ranks Above Junk Status.
Ok, what if all the other 3 countries also go into trouble like Greece, what will happen? Well, these 4 countries Greece, Portugal, Ireland and Spain combined, only constitutes 2.7% of the World Economy…..
Will these 4 countries, even if all 4 are in trouble, derail the World’s economy? Well, if we look from this Big Picture analysis, it appears to be unlikely.
In last issue of the newsletter, I already shared that U.S’s Exports to Europe (yes, the entire Europe’s 16 countries) only constitutes 2% of U.S. Economy, while U.S. domestic consumption, constitutes 70% of U.S. economy. Thus, will slowdown in Europe drastically affect U.S.’s economy? The answer again appears to be unlikely.
How come NONE of the Newspapers in the World carry such an analysis and none of the Analysts when approached by Channel 8 News on 5 May 2010 when Global Stock Markets fell 2% dare to comment on Greece Debt Crisis that I was then asked to comment? I really don’t know.
So I literally “stuck my neck out” on 5 May 2010 Channel 8 News at 10 pm to say that Greece debt crisis is unlikely to lead to another round of Global Financial Crisis.
In my opinion, it is a matter of WHO will come out to rescue Greece. Euro does not want to do it, becos they know that if they do it, then it creates a precedent, and the next country in trouble, would also gladly come out to seek help. Out of the 16 countries in Euro, it’ll be likely for Germany and France, the 2 Richer countries to be “footing bulk of the bill”. Both Germany and France are thus reluctant for Euro to save Greece.
What about IMF? IMF’s money comes from contribution from member country, and currently, the Biggest Contributor is U.S. So if IMF steps out to save Greece, make no mistake, it’ll be U.S. to be footing bulk of the bill. Obama hopes IMF needs not step out as he will have hard time to answer to U.S. citizens since U.S. unemployment rate is still very high, and U.S. citizens would question why Euro is not saving Greece, but need an outsider U.S. to save Greece.
So I think a lot of negotiations are now going behind the scene. However, ultimately, Greece will be saved, it is a only a question of “who” will be footing the bill.
Just ask yourself whether my analysis makes sense or not. Are my views clear and are they supported by information or just anyhow say. Or are you more enlightened by what you read in newspapers. Some of my clients said they are more confused reading newspaper and they “see light” when they read my newsletter.
Will Greece debt problem be allowed to go on to trigger a second round of Global Financial Crisis? I have the faith that politicians will have better common sense to do what is necessary to prevent that. I’m not Obama, I cannot make the decision, I can only analyse based on Public Information. (I have NO insider information, nope, Obama does not know me, yet).
Note: above is just my personal opinion. This e-newsletter is not giving you advice.
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