Global Economics Affecting Greece, US Economy

May 10th, 2010 by

Stock quotes, no real time quotes at the stock marketMany economists have been concerned with the affect of the U.S. bailout on the long term health of our economy. There has been considerable discussion on whether it was big enough, or over the top, which could eventually lead to runaway inflation.

However, the simmering financial problems in the European Union have largely been ignored for the past year. In fact, with the focus on the U.S. subprime mortgage market the massive overhanging debt of these European countries may finally be coming to a head. Even if Greece receives the necessary funding it will require, there will be massive changes in the way the average citizen of Greece lives.

The tax rate will have to increase considerably to repay the debt, and government spending will need to be cut to an extraordinarily low rate. This could cause deflation and make it impossible for repayment to happen. Much of the European debt is held by the largest banks of Europe, and default by countries on this debt could lead to further liquidity problems reverberating again throughout the global economy. This may account for the overall strength of safe haven investments such as gold and silver.