Monday, May 3, 2010

Post-GFC fallout in Greece

In some countries the effects of the GFC (global financial crisis that started in Q4 2008) are still being played out. Greece, in particular, is in danger of going into bankruptcy. Many reasons contribute to this situation; suffice to say that Greece is a country that has borrowed more than it can pay back and it is simultaneously facing a plunge in revenue. This situation is no different from what many individuals face today: a person gets a good income; he starts spending beyond his means; the job environment changes and he finds his income dropping. All of a sudden, he finds himself in a liquidity trap. His expenses continue to come in but he couldn't get his pay to come in fast enough. He is now staring in the face of bankruptcy.

Greece's membership in the euro has denied it the ability to devalue its currency at this time of need. It is forced to take drastic measures to reduce its deficit and to increase taxes. Salaried workers see their tax rise from 10% to 38% all of a sudden. Keep yourselves tuned in to what's playing out in Greece, as well as Portugal, Spain, and Italy.... the global financial crisis is not over yet for many people and many countries.

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