It’s interesting to read about recent developments in the world of economy. Greece is in deep financial trouble now and, even worse, it could mark the beginning of another financial crisis that rivals the scale of the 2008 financial crisis.
As The Economist put it, in 2008 the problem was the banks and the goverments was forced to save the financial system from collapsing. Now the problems are the governments themselves. They are the ones who fail to maintain sound financial system which eventually leads them to a pile of debt so deep it’s difficult to imagine how to eventually pay it.
Just take Greece as an example. Its debt is 120% of its GDP which means that it’s way more than the whole economy of the country. Even if everyone in the country gives their income to pay the country’s debt, there’s still 20% of the debt left. In the real world, of course, there’s no way everyone will give up their income for that purpose so the problem here is huge.
What I’m afraid of is the rippling effect that may come from it. If one country (Greek is the most likely one at the moment) defaulted, there’s a chance that other countries will follow suit, especially those which are already weak economically. In 2008, when the banks failed the governments needed to step in to save the system. Now that the governments themselves are in trouble, who will save them? That’s the scary situation that might happen if this situation is unsolved.
Of course, I hope it won’t happen. I hope the danger the problematic countries have can be contained in such a way that won’t endanger the global financial system. While a there are a lot of benefits of global, interconnected financial system we now have, it also has a big problem: problem in one part of the system can easily affect other parts of the system. That’s why governments need to take quick actions to prevent that from happening.