Last Updated Oct 10, 2011 11:04 AM EDT
Let's begin by acknowledging that we have a crisis with the potential to do significant financial damage. The focus of investors is now on Greece, with about $500 billion of debt outstanding, and an unsustainable debt-to-GDP ratio of over 160 percent and growing. Thus, the only questions are:
- When Greece will default (as it seems more like a certainty by now)?
- How big will the losses be?
- Will the process be orderly?
- Will it be contained to just Greece?
If, when, and how this situation gets resolved is what investors are concerned about. Investors know the great difficulty the U.S. faced in coming up with a solution to our crisis, which we eventually did -- and we only have one government and two parties trying to reach agreement. Europe has 27 governments and central banks that must agree before a solution can be implemented. And different countries have different concerns, within countries different parties have different views, and European countries typically have more political parties they have to get to agree than we do. The uncertainty created while they debate the situation is what's causing the market trouble.
Photo courtesy of archer10 (Dennis) on Flickr.