The headlines have been screaming it for a week – “Markets soft due to ongoing Greek Crisis,” or something similar. But like The Onion, these headlines often have all the punchline in them and the article doesn’t give much more. Why is the Greek crisis important for US stocks and our economy? Why should we care?
The answer is complicated and hard to explain in an article of less than a few thousand words. The short version of it is very scary – because a Greek default could bring down many financial institutions across the developed world. News outlets have been shying away from this and done, on balance, a lousy job portraying the real problem with Greece.
Not that something awful is about to happen – but the odds of cataclysm are high enough that they have become scary. That means we have to understand that worst case scenario to understand why even a small threat of it multiplies out to a huge risk.