Monday, May 10, 2010

Greece's financial crisis can affect the USA

Not only is the U.S. in a financial crisis but so in Greece! In Greece the government is cutting a teachers salary of $27,300 by about 5,300 and also the government is going to raise the value of added tax on a a lot of purchased items by at least 23%. And how all of this is going to affect the U.S. is how Europe's debt crisis is going to affect American stores. It will make some of the U.S. corporations to raise money by stock market investors. So the Obama administration is going to have to find a way of creating more jobs by doubling the amount of U.S. exports. In Europe they had a bid to try and stop the "Aegean Flu" from spreading and to support their currency. So on Sunday European leaders announced that they made a deal with the "International Monetary Fund" to have as much as 750 billion euros ($995 billion) to go towards loans and to other financing. The U.S. is all apart of these loans because the U.S. banks hold about 16.5 billion in loans to all of the Greek borrowers. Even though American banks hold 10 times more than that amount. So how this could be a bad thing for the U.S. is if the Europeans have a huge amount of losses on the Greek loans than it could make it harder for the U.S. to get credit if Europe's banks lose money because of Greek losses. So commercial paper (corporate borrowing) for the U.S. is about 30%. An affect from the crisis for the Europeans at least the euro has fallen more than 11% against the U.S. dollar, so that makes Europe products less expensive. Also on the positive side for the U.S. is that for the U.S. Treasury securities it is making Uncle Sam cheaper to borrow so now the U.S. can get cheaper loans for 3o years at rate of 4.28%! So it looks really bad for Greece right now do.. Do you think this is really going to affect the U.S. in a positive or negative way what do you think?

2 comments:

Katherine Wayne said...

I believe this is going to affect the United States economy is a very negative way because if Greece completely defaults and fails then the Euro will lessen in value and will discourage investments. I believe that Greece should exit the Euro for a certain amount of time so the economy can recover and mass unemployment can be avoided.

Yoda Yee said...

Ouch. This is just another problem between systemic risk and moral hazard. If Greece's economic system tanks and as a result, tanks the European markets, I'm very sure that the US will bailout the Greeks. However, Greece should not be expecting a bailout every time they want "free money." To be honest, I think the Greek civilians are expecting too much from the government. I am no free-market economist or a far right-wing candidate, but I feel like this crisis is getting too out of control. Expecting government money for no work is a bit absurd.