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Exploring the Implications of a Greek Collapse

It’s now July of 2015, and still Europe and the rest of the world waits on edge as Greece’s economic saga continues to unfold. All winter and spring, Greek and its European Union lenders engaged in terse bailout negotiations, with Greece facing multiple threats of financial collapse. While negotiations are ongoing, it seems that the situation has finally reached a point of no return. As of June 29, Greek citizens can withdraw just 60 euros, or 66 dollars, per day from Greek banks; it’s estimated that by July 13, Greek banks will officially run out of money.  Greece’s lack of money has finally become a tangible reality for Greeks, and the government and EU are now forced to find a way to move forward, or have Greece abandon the euro and membership in the Eurozone altogether.

Greek’s economic peril has many around the world, like financial expert Dawn J Bennett and Forbes columnist Chris Versace, watching closely and wondering: Will Greece leave the euro, and if so, what does will it mean for us?

According to Versace, who recently sat down with Bennett on her nationally-syndicated talk show, “Financial Myth Busting with Dawn Bennett”, it’s more likely that Greece will agree to stay with the euro than return to the drachma. It’s what a seeming majority of Greeks favor, and by returning to the drachma, a host of uncertainties are introduced. Of course, members of the Eurozone, particularly heavy-hitter Angela Merkel of Germany, may be unwilling to negotiate and could outright cut Greece from the Eurozone rather than commit to another bailout. Greece’s inability to reform its pension system, eliminate corruption, and collect taxes have long frustrated Germans and other Eurozone members; if Greece can’t reform from the inside, why should other countries continue to offer financial aid?

The issue is complex, to be sure. Regardless of whether Greece rightly or wrongly leaves the Eurozone, Versace argues that a potential “Grexit” won’t have a significant impact on the U.S. economy or investors. Why?

  • The Eurozone is comprised of nearly 20 other countries, many of which maintain strong, burgeoning economies. Greece is an important economic member of the group, but its absence won’t be catastrophic, and will actually relieve lender nations the burden of future bailouts. Without too much shakeup in the Eurozone, the U.S. has little to worry about.
  • Though a Grexit will probably hurt the U.S. stock market in the short term, it will actually provide investors the opportunity to purchase stocks at lower prices or increase existing investments.
  • The European Central Bank’s 2015 stimulus program is good news for investors around the world, and will help counteract any potential negative consequences of a Grexit. This $3.1 trillion program is already helping to grow the Eurozone economy and will serve as a stabilizing force for U.S. investors.

Thus, while the economic future of Greece may be uncertain, that of the U.S. is not (as much). We have a host of our own economic challenges to worry about to be sure, but a Grexit won’t be an added reason for concern.

 

Bennett Group Financial Services LLC, based in Washington, D.C., is a comprehensive financial services firm committed to providing opportunities to clients’ as they seek long-term financial success. Its customized programs are designed with the potential to help grow, lower overall risk and conserve client assets by delivering a high level of personalized service and skill.

For more information, call 866-286-2268 or visit http://www.bennettgroupfinancial.com

Securities offered through Western International Securities Inc. (WIS), member FINRA/SIPC. BGFS and WIS are separate and unaffiliated entities.

About Dawn Bennett

Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting http://www.financialmythbusting.com

She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included rock legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN a as well as take podcasts on the road and forums for interaction.

She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett ordbennett@bennettgroupfinancial.com

 

Why We Should Be Wary of a “Grexit”

A report recently conducted by the United Nations found that of 158 countries surveyed on levels of happiness, Greece, a country characterized by tranquil Mediterranean waters, easy living and strongly-rooted traditions, ranked near the bottom of the listing at a dismal 102nd place.

While this ranking would raise eyebrows any other year, when we consider the financial chaos that’s entrenched this country of late, it’s little surprise that Grecians don’t have much of an optimistic outlook.

As of May 2015, Greece maintains approximately 330 billion euros in debt, and its chances of defaulting on this debt grow increasingly likely with each Eurozone summit that passes. These meetings with potential bailout nations have primarily underscored the belief that additional bailout money isn’t the answer, and that Greece should instead face what’s being called a “Grexit” from the Eurozone.

At this point, Greece’s exit stage left seems highly likely, and while many Eurozone nations, even those who support Greece, believe an exit to be the best course of action for this struggling country (the European Central Bank is already preparing for its departure), others around the world identify some troubling potential consequences.  Though the Economic Intelligence Unit believes there’s only a 40% chance that Greece will actually leave the Eurozone (no country has ever made an exit before, so the unknowns may be enough to keep Greece in tow), this likelihood is enough to make many financial experts around the world, including long-time money manager Dawn J Bennett, concerned about the impact it would have on the global economy.

Of the potential negative consequences, one of the most alarming is the potential for other European economies to be significantly impacted by Greece’s unstable economy, and for Greek creditors to suffer throughout Europe. Greece’s economy is relatively small, but if returning to the drachma sends economic repercussions throughout Europe, which it very well could, the U.S. will eventually feel those repercussions too in the form of lost jobs and European exports.

The global economy is already fragile, and though the U.S. is inclined to tout its own economic growth, as Bennett points out, the U.S. economy isn’t as strong as we’d like to think. Major corporations, including McDonald’s and Caterpillar, are experiencing long-term, unprecedented profit losses, and job growth in the U.S. has been sluggish and far below what analysts had previously predicted. Unemployment rates remain stagnant and more publicly traded companies in the U.S. are filing for bankruptcy than they were last year.

Even the U.S.’s own happiness ranking is reflective of its uncertain economic conditions, as the U.S. ranked 15th, behind Israel and Mexico. This tentative optimism echoes a previous consumer study which found job seekers to be only conservatively optimistic about their chances of securing a desirable job in the near future.

Whether or not Greece makes a “Grexit” from the Eurozone, the possibility of a destabilized global economy has put into perspective for many analysts like Bennett the real consequences of a global economic downturn. The U.S. may believe its economy to be infallible, but a “Grexit” may prove otherwise.

 

Bennett Group Financial Services LLC, based in Washington, D.C., is a comprehensive financial services firm committed to providing opportunities to clients’ as they seek long-term financial success. Its customized programs are designed with the potential to help grow, lower overall risk and conserve client assets by delivering a high level of personalized service and skill.

For more information, call 866-286-2268 or visit http://www.bennettgroupfinancial.com

Securities offered through Western International Securities Inc. (WIS), member FINRA/SIPC. BGFS and WIS are separate and unaffiliated entities.

About Dawn Bennett

Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting http://www.financialmythbusting.com

She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included rock legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN a as well as take podcasts on the road and forums for interaction.

She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett ordbennett@bennettgroupfinancial.com