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Economic Review

5/20/2010

You may ask yourself….why has the EuroZone problem become so chaotic?  And the answer is….poor decision making by key officials in leadership positions.

The US experienced its massive fallout from a declining real estate market and subsequent evaporation of value of related financial products connected to ill devised loans.  The ramifications were drastic, as the US economy continues to suffer from heavy numbers of foreclosures, high unemployment and a general deterioration in wealth of its residents.  However one positive was the ability of US markets to stabilize…that is until the EURO Zone simply dropped the ball regarding the plight of Greece.

Turmoil in the status of the Greek economy was well known several months ago, and although the situation was by no means an easy fix, it was the lack of any type of decision making by leaders that resulted in the extreme market moves that are disrupting the global marketplace today.  Because Euro Zone leaders (especially Germany’s Merkel) waited until the markets turned tumultuous (e.g. rapid decline in the EURO and massive increase in Greek interest rates) before making any tangible decision, the result has been a continued chaotic state in the overall financial system, despite the plan for a significant bailout. 

The lack of timely decision making helped magnify a difficult situation into a global problem for markets.  Analysts are now viewing the massive funds allocated to the Greek financial system as just plugging a short term hole, where the longer term issue is filled with significant uncertainty.  This along with now drastic decision making of changing rules for trading securities (Germany’s termination of naked short selling without aligning its actions with other EuroZone nations) is exacerbating the high and chaotic volatility in the financial markets.

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