Last week began with crosscurrents that made it hard to predict. See On
Monday, It's China Versus Greece.
This week is starting with no such ambiguity. The Greeks had their vote and
tossed a
resounding "NO" at their European creditors. And the markets are not happy:
S&P 500 futures down 1.5%
on Greek vote
U.S. stock futures opened sharply lower Sunday night after the Greek people
voted resoundingly to reject proposals from their European creditors. S&P
500 futures fell 1.5 percent in early trading after 6 p.m. ET (2200 GMT).
Once the magnitude of the Greek vote became clear, the euro began falling
against other major currencies, and European stock futures sank (led by a
4 percent decline for the benchmark German DAX).
Because it's still early on Sunday, a lot of futures markets have yet to open.
But when they do it will be with a bang. So expect, along with plunging European
and US stocks, extreme currency swings, lower oil prices and surging
equities volatility.
And then comes the real excitement. The Greek vote wasn't legally binding
but it does free the country's leaders to stand up to its creditors, so expect
some big threats to be tossed out on Monday. Here's a typically evocative headline
from Zero Hedge: Greece
Contemplates Nuclear Options, May Print Euros, Implement Parellel Currency,
Nationalize Banks.
This is a story with legs, of course, but as always it's important to understand
that Greece isn't the issue. It is to the global financial system what who
takes out the trash is to an unhappily married couple: Not the big issue but
a perfectly acceptable start to a catastrophic conflict. The real problems
are in the quadrillion dollar derivatives market, the debt/GDP trends of five
or six major countries, income inequality in the US and elsewhere, and the
Chinese shadow banking system. Greece might be where it starts but those other
places are where it will end.
