The Great Web of Debt Related Crisis
Posted by Stephen Cline on May 19th, 2010The global economy is a great web of inter connected climbers trying to climb a mountain. If one falls, the others feel the pull and some weaker ones let go and fall to economic crisis themselves. A major financial crisis in one country will be no easily contained and will have its effect on foreign countries.
Analysts predict that the effect of sovereign debt in Europe will have a much greater effect on the global economy than the financial implosion that started with the fall of Lehman Brothers in 2008. The United State is far from immune to the long term effect of European frugality.
The policy maker’s decisions after the 2008 recession have caused a massive increase in public debt in every developed economy therefore leading to the next phase of the global economic crisis. European politicians claim that only Greece was in debt and no other country in Europe is in a similar condition deteriorated when other European countries such as Spain, Ireland, Portugal and Italy came under harsh scrutiny from the bond vigilantes. This brought the small rescue package of a few billions to a whopping 1 trillion for these five countries.
Even thou U.S is the beneficiary in the short run when countries run to as a safe investment, it will feel the effects in the long run when the severe budget cuts of the European nations will imperil the already fragile nature of the U.S. economy. Ant the worst part is unlike the Wall Street bail out in 2008, this time there will be no tax payer’s money available from some far off land.