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With daily news of Greece’s financial crisis, I wanted to provide a brief overview to shed some light on the situation and its potential impact to the United States.
Years of excessive government spending and commitments coupled with a highly regulated and an unproductive economy have brought the country face-to-face with its current financial crisis. As Greece nears defaulting on its national debt, the government is encountering resistance from the people who do not want to have a reduction in government programs. Greece is trying to restructure its debt with the European Union and International Monetary Fund who require that Greece first agree upon a plan to increase revenues and cut spending. The financial markets have responded skittishly at the thought of a second bailout for Greece, the potential domino effect a default would have onto other countries in the European community, such as Spain, Portugal, Italy and Ireland and the credibility of the euro. While a default by Greece won’t by itself cause a financial crisis, it’s the domino effect that is of concern.
How might this impact the United States?
Most of the loans to Greece and to other European countries are from European private banks. U.S. banks have not loaned much directly to Greece’s national debt. Any default by Greece may not directly impact U.S. banks or create another banking crisis in the U.S. similar to that of 2008.
That said, U.S. banks have loaned money to European private banks. If these European banks run into problems, they will seek help from their governments, the European Union and the International Monetary Fund. This should minimize any direct impact to U.S. banks. It is likely that the U.S. government would help to bail out Europe if Greece’s default did in fact carry over to multiple European nations and create a widespread European crisis. While the U.S. remains one of the strongest economic countries, we are trying to fix our own set of economic problems, which could limit our ability to help other countries.
What can individuals do?
I realize these may seem tired and unexciting sayings in our society that likes to live on the edge, but the basic principles of “living within your means” and “saving for a rainy day” actually do work. I know that many of you are facing your own personal financial challenges. I want to remind and encourage you that it’s “never too late to get started” and that I’d like to help you. Please email or call me with any questions or to schedule an appointment if you’d like to meet with me.