Somehow we missed the news that The Golden Jackass is now writing for the AP.
The MSM publication has released a piece on the Greece crisis that reads like something out of the latest Hat Trick Letter- essentially depicting a step-by-step analysis on how today’s Greek elections (1st exit poll shows Syriza & the New Democracy in a dead heat) could turn into a full-blown global contagion.
From the AP:
The unthinkable suddenly looks possible.
Bankers, governments and investors are preparing for Greece to stop using the euro as its currency, a move that could spread turmoil throughout the global financial system.
The worst case envisions governments defaulting on their debts, a run on European banks and a worldwide credit crunch reminiscent of the financial crisis in the fall of 2008.
A Greek election on Sunday will determine whether it happens. Syriza, a party opposed to the restrictions placed on Greece in exchange for a bailout from European neighbors, could do well.
If Syriza gains power and rejects the terms of the bailout, Greece could lose its lifeline, default on its debt and decide that it must print its own currency, the drachma, to stay afloat.
AP business writer Matthew Craft breaks down how the crisis could quickly turn global in three acts:
What would Greece’s exit look like? In the worst case, it starts off messy.
The government resurrects the drachma, the currency Greece used before the euro, and says each drachma equals one euro. But currency markets would treat it differently. Banks’ foreign-exchange experts expect the drachma would plunge to half the value of the euro soon after its debut.
For Greeks, that would likely mean surging inflation
Contagion begins in the 2nd stage:
Here’s where things get scary.
The European Central Bank and European Union would have to persuade investors in government bonds that they will keep Portugal, Spain and Italy from following Greece out the door. Otherwise, borrowing costs for those countries would shoot higher.
The main way European leaders have tried to calm bond markets is by lending to weaker governments from two bailout funds. Experts say these two funds, designed as a financial firewall to stop the crisis from spreading, need more firepower.
Much of the (EURO)248 billion ($310 billion) left in one of them, the European Financial Stability Facility, was pledged by the same countries that may wind up needing it, Vamvakidis says.
Finally, we have an MSM reporter who understands THE REAL RISK OF GLOBAL CONTAGION WITH THE EUROPEAN DEBT CRISIS: Credit default swaps.
A full-blown crisis would cross the Atlantic through the dense web of contracts, loans and other financial transactions that tie European banks to those in the U.S., experts say.
Blythe, the professor at Brown, believes credit default swaps, the complex financial instruments made infamous by the 2008 financial crisis, would provide the path.