These three things are true:
The likelihood that Greece would leave the eurozone, devalue its currency and repudiate its debts increased significantly after financial markets closed over the weekend.
The possibility of that event had sent tremors of fear through global financial markets from early 2010 through the middle of 2012, creating wild swings in stock and bond markets.
And on Monday, the market reaction to seeing Greece finally reach the edge of default was pretty quiet, as these things go. European stocks fell 3 percent. Spanish and Italian bonds fell, pushing rates in those countries up, but only to a mere 2.35 percent and 2.39 percent, respectively, for 10-year-bonds, very low by historical standards. The United States stock market is down a mere 0.6 percent.
In other words, financial markets are concerned, and think that the Greek crisis could damage the earnings of European companies and make investors a bit more wary of the debt of other Southern European countries. But they’re not remotely betting that the situation will spin out of control and lead to a full-fledged unraveling of the eurozone or a recession across Europe.
That is in contrast with previous flashpoints in the Greek crisis, including May 2010; November 2010; July through December 2011; and May 2012, when each day’s trading activity was a referendum on whether some catastrophic outcome had become more likely or less.
Consider that the Vix, a measure of expected future volatility in the United States stock market, rose 22 percent to 17.1 on Monday. That’s a big increase in percentage terms, but in the summer of 2011, it bounced around between 16 and 43.
The question now is whether markets are right, or are being too sanguine.
Perhaps a Greek exit really won’t be a big deal. There is little doubt that an economic catastrophe is underway for Greece itself and its 11 million citizens. The country’s banks and stock market were closed Monday; anexchange-traded fund for Greek stocks that trades in New York was downby 15 percent.
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