Greece is approximately 1/2 the size of Colorado with a population less than the city of Los Angeles. Yet, it drives the USA stock market crazy and occupies most of the financial news. Greece is important because it owes the US Treasury, American banks and financial firms a pot-full of money. According to one report, Greece owes the US Treasury a large slice of the $2 trillion the treasury loaned to Europe.
The same report states that no one truly knows where the whole $2 trillion went, but a large slice went to Greece. The money was loaned to Greece because financial firms and the Treasury could make a killing on high Greece interest rates. While you and I were making 1.5% interest on our bank CDs, the financial movers and shakers were making up to 20% interest on Greece bonds. However, the principal on these loans is at risk and if Greece defaults, then these large swinging financial firms would take a loss.
The point is that Greece, small as it is and located 6,000 miles from the center of America, effects the shares I own. It also effects 75 million other Americans who own shares in American companies. From pension funds to social security payments, it is all indelibly linked to Greece. But it is not linked because Greece has special mineral deposits, manufacturing or technology, it is linked because money typically flows to the highest potential returns and that is where the risk is too.
One American firm has felt this link already. A large swinging investment firm, MF Global, filed for bankruptcy yesterday. The Company's website described the Company "As well-capitalized with more than $1 billion in revenues." I suspect they are changing the website description as I write.
Greece is a financial mouse that roared. Do not think that Greece does not effect the price of a cheese-burger. As inscrutable as it seems, it does.
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