The headlines on the latest twist in Greece's attempt to gets its austerity measures in order certainly sound alarming. "Greece talks cast lengthy shadow" is the way the Financial Times put it. Our own Globe and Mail said in its headline that "Greece tiptoes closer to default."
Yikes. But for all the pouting, there isn't a whole lot of crying. The Dow Jones industrial average is meandering with insignificant losses on Monday afternoon. Same goes for major European indexes: The U.K.'s FTSE 100 fell 0.2 per cent and Germany's DAX index was a rounding-error away from flat.
Tim Duy has some interesting thoughts, though they aren't uplifting. He suggests that financial markets aren't prepared for a "suicide run" by Greece -- in which the country lashes out against enforced austerity measures in the hope that the euro zone backs down -- just as they weren't prepared for the collapse of Lehman Brothers in 2008. And he doesn't blame financial markets for this blase response.
"Every time we come to the brink, and prognosticators call for the apocalypse, someone backs down," he said. "Why should this time be any different? Honestly, it is tough to argue with that logic. Expectations of imminent financial collapse have simply gone unmet, leaving markets relatively unfazed by the most recent events in Greece."
Except that he doesn't think things will necessarily end well. He believes Greece is beyond saving without a significant transfer, as opposed to a loan, that buys Greece time to allow its economy to adjust. As for the market's response, the screaming headlines and warnings of imminent collapse sound to him like the boy who cried wolf -- a story ultimately had a bad ending.
