Daily Archives: June 27, 2011
An Interesting interview from another FX site, here is part of it, feel free to click on the link below to see the rest of it.
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What do you think about the idea that the Greece/Eurozone problem is smelling like Lehman Brother in 2008 summer?
There is little doubt that a Greece default would trigger a global financial downturn similar to the effect of Lehman’s collapse. The Greece crisis will likely have more dire consequences. Greece has over €340 billion in bonds outstanding while Lehman had $100 billion. Although Lehman did have a substantial amount of derivatives outstanding, they hedged their positions, a benefit that evades Greece. When Lehman went down, despite its effects being felt at many banks, it did not take those banks down with them. In Europe, the contagion risk is far greater. Greece represents a very small portion of the Euro zone economy. The monetary loss other governments and banks would face due to exposure in Greek bonds, while large, would be manageable. It is the fear of other debt-ridden Euro members (PIIGS) following suit that would set off an irreversible catastrophe.