It seems like we’ve been talking about Greece defaulting for a LONG time. Things are coming to a head again quickly and there are renewed concerns that this could be the start of another worldwide economic implosion. People are asking if a Greek default is our new “Lehman moment,” harkening back to the failure of Lehman Brothers in late 2008 when things got bad in a hurry. Since the Greek crisis has hit the news again, interest rates have risen slightly, but not tremendously.
Is it possible that this is the start of another huge downturn? Some people think so, however, most of the “experts” I follow don’t think so. If Greece had defaulted a few years ago, it very well may have caused a cascade effect that would have crippled the global finance world, again. However, the powers-that-be have spent the last few years making deals behind the scenes to try to insulate the rest of the world from Greece. It’s all very complicated, of course, and it could still go sideways, but the general idea (hope?) is that while things will be especially rough for Greece, the rest of the world won’t be impacted too greatly.
People in the know are watching Italy and Spain very carefully because they have some similar problems (though not as bad) as Greece, but their economies are MUCH larger than Greece. Of course right now creditors are demanding sky-high interest rates when lending to Greece because of the increased risk. The fear is that if creditors start to demand higher rates from Italy and Spain because of what is going on in Greece, this could be the falling domino that could lead to a European recession, which hurts us here in the U.S., too, because of how connected the global economy is.