I was on a tropical island beach in the Gulf of Mexico during the first Greek crisis back in 2010. It was one of those tranquil weeks where you check in once during the morning and once at night, just to stay abreast of the world.
That morning I had skipped the internet check in altogether and just proceeded directly to the ocean to have morning breakfast with mimosa. After breakfast (if you count the next three hours of mimosa as part of breakfast) I proceeded inside.
I will never forget this short journey back to the residence where I was staying, as it was marked with a black omen. The backyard, you see, was guarded jealously by a spring loaded door hinge, which took its duties quite seriously. I had been careful to avoid its wrathful impertinence before now, but on this occasion could not evade the blow it dealt me. Bleeding copiously from the back of my heel, I left a trail of thick, ruby red blood towards the house.
After I was bandaged up, I realized that was the least amount of blood I would shed that day.
The losses from the original Greek crisis and the panic that followed were intense. The volatility cannot be understated, with the VIX ramping from the mid teens to over 40 in a matter of a few short weeks. The world “contagion” was being used by taxi drivers in day to day conversation.
This is nothing.
We have had 5 long years to prepare for this. If any institutions are holding Greek debt as leverage against other positions, they are the world’s biggest idiots. They would deserve to lose everything. In fact, given the zeal with which central banks have been policing finance lately, I’m not sure such a hypothetical institution could even exist in the first place.
Greek debt has been aggressively purchased and stored away in the vaults of the public, where it can be ignored for the next three decades.
I originally thought we were pretty screwed when the first European Debt Crisis hit the waves. Average maturities of European countries were something incomprehensibly stupid, like 2 years. There was no organization of the central banks. No mandate by the ECB to intervene. No control of the euro. I bet against them and then I lost.
If we were going to collapse from European incompetence, that was the time to do it.
My guess is, although Greece seems finally ready to go, this is more a blow to the reputations of the morons that started the EU project than it is to the financial system, at this point in time.