Well, I generally consider myself a Weatherman (i.e. I can tell which way the wind is going to blow), but I was wrong about the vote in Greece that I talked about last week. The “No” vote sets the two sides in definite conflict and we will see if there is a path forward together this week. I hope in the long term that cooler heads will prevail, but I am not sure that they will.
Let me outline the problem in Greece from both sides. The other European Governments have loaned Greece a lot of money over $200B. The question that they have is whether it will ever be paid back. Debt is like that. Creditors take a risk in loaning you money. They can lose by not being paid back for the money they have loaned. On top of that, the European Governments don’t like the way that Greece operates. Their concern is that if Greece does not change that they will never get out of the cycle of requiring more money. They do not want to throw good money after bad. It is like loaning money to a lazy relative. If they come back every month for more money, then are they ever going to fix their life?
On the other side, Greece is in a desperate economic condition. Unemployment is over 25% and it is higher for young people. Going the way they are is not going to improve things. Their does not seem to be any relief by continuing down a path to pay down the debt. The austerity programs are not working to help rebuild the economy. So, from a citizen’s perspective why not vote “No” and at least make a clean break from the debt? The challenge here is that Greece will still need to change. They need a stronger work ethic and to reduce the amount of services that their government provides. If Greece is going to do those things, why not stay with a stronger currency to make the recovery better in the long term.
As you can tell, there are no real answers that are simple and fit in a sound bite. I hope both sides are committed to working to find a long term answer that makes this work for everyone. Buy Greece some room to maneuver and get the economy on track so the debtors can be paid.
At the same time this week, there has been bad news out of the Chinese Stock Market. I don’t think this is a reflection of a fundamental change in the Chinese economy. It looks to be a reconciliation with the realities of the Chinese economy and the value displayed in the Chinese Stock Market. I don’t want to write a lot about this now, but this bears paying attention to in the future.
So, write about all this in a blog dedicated to Sonoma County? We are part of the larger world and macroeconomic conditions will drive our local economy to an extent. This is more true of China than of Greece in the short term. China has begun to make investments in the Northern California Wine Industry and that could mean more money in all of our pockets. China could be a huge market for our wines and we should watch closely what happens there. Greece is less impactful in the short term, as long as Europe remains steady in general. There has been more European interest in our wines over time and a strong Europe is another good market for the Wine Country.
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