An article (and video) on Yahoo Finance this morning is headlined “Will distance from Greece save U.S. markets?” Michael Santoli raises the question, and carefully doesn’t answer it. He identified a few keys to watch for clues whether and how severely the Greek crisis could impact the US markets and economy, including how severe any retrenchment in popular European stocks might be, how far US bank stocks – outperforming the market in recent months -- fall in the US, and how significant any “flight to safety” response is in the market for U.S. Treasuries, where yields have been rising this year, albeit from historic lows.
The US economy can be hurt by the Greek crisis, but it is not as if that is the only way factors underlying the Greek crisis can hurt the US economy. US government(s) share some of the bad health habits that have become painfully obvious in Greece, a topic I wrote about on April 1 (“The Greek crisis: the reasons why, and the lessons available”) and April 15 (“Are we Greece?”).
We aren’t Greece, yet, to be sure. But the factors underlying the Greek crisis – including accounting and disclosure issues central to our mission at Truth in Accounting – certainly aren’t absent here, and they do not safeguard our state and federal governments’ financial health.
Cynics about how bad the Greece crisis was are now having their confidence shaken. In the US, we can help avoid similar circumstances with accelerated efforts to inform citizens about government financial reporting, and by avoiding the kinds of accounting chicanery underlying the Greek meltdown.