INTERCONNECTEDNESS - WHY THE EURO CRISIS IS IMPORTANT

This past Friday I was fortunate enough to be the guest speaker at the Property Council of Australia - South Australia lunch and in researching for the speech (titled "The US Construction Industry Crunch"), I came across some rather good information in the book "This Time Is Different: Eight Centuries of Financial Folly" by Carmen M. Reinhart which helps explain why we should ALL be worried about the Greek / European debt crisis.  Ms. Reinhart explains that:

• Banking crises in advanced economies significantly drag down world growth. The slowing, or outright contraction, of economic activity tends to hit exports especially hard.
• Weakening global growth has historically been associated with declining commodity prices.
• Banking crises in global financial centers (and the credit crunch that accompany them) produce a “sudden stop” of lending to countries at the periphery.
• Banking crises have historically been contagious,
• A banking crisis in one country can cause a similar loss of confidence in neighboring or similar countries, as creditors look for common problems.

That definitely got my attention - the trouble in Greece / Europe is actually important to us all.

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posted by The QS

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