Discussion on Ben Bernanke

The Fed chief has received Time magazine's annual honor. The MoneyWatch editors debate whether he deserves the title.

Discussion on Ben Bernanke Jill Schlesinger: I'm Jill Schlesinger, Editor-at-Large. Jack Otter: And I'm Jack Otter, Executive Editor. Jill Schlesinger: In today's Reality Check, why are the Pigs of Europe causing such a stink? Jill Schlesinger: Jack, we've got Portugal, Italy, Ireland, Greece, and Spain. They're being called the Pigs of Europe. Why? Jack Otter: That's not a nice name. I'd much rather be a brick, than a pig. Jill Schlesinger: Yes, indeed. Jack Otter: They're being called this because their financial situation makes us look like Goldman Saks. In Spain, nineteen percent unemployment, in Greece, apparently, the estimates of its debt are eight hundred and seventy five percent of that country's GPD. Jill Schlesinger: Oh my gosh. Jack Otter: And so, in America we might think, that it's Greece. It's far away, what's the problem? It's a small economy. But people might have thought that in the late nineties when Thailand had a currency problem, and the Dow dropped, I think, five hundred and fifty points in one day, and the entire global economy really stalled because of a problem that started in Asia. I think now in New Europe, if you will, we can see the same thing. Jill Schlesinger: And the real fear is that people think, okay, lets say Greece were to default on its obligations, that it causes a ripple effect and people say to me, oh how bad could that be? And I say well remember when the Lehman Brothers ripple effect wasn't going to be bad? That's what people are worried about. But this week, the European Union is going to meet and do you think that they're going to bail these guys out? What's going to happen here? Jack Otter: If I had to bet, I would say they probably will bail them out. And it's a big problem. The European Union is kind of a union, cause they share the same currency, but the economies are vastly different. I mean, back when Italy had a lira and it ran into economic problems, which it frequently did, it could just devalue the lira, sell some Alpha Romeos cheap, and the economy would come back. Now it's all the euro, and so they don't have that currency option and there are lots of problems. And remember-- Jill Schlesinger: And Germany and France, who have stronger economies, aren't really very excited about bailing out their brothers and sisters to the south. Right? Jack Otter: Especially now, because the entire global economy is so weak, and I think that's the real problem here. You know, in the Asian flu, that was the late nineties, the global economy was booming. Now, we're all tottering. I mean, these three-legged stools are on two legs. If Greece cuts the other one out I would be worried. Jill Schlesinger So do you think investors should do anything right now or do you think it is going to--it is going to blow over? The stench is going to pass? Are we going to be okay? Do you think? Jack Otter: Well, for anybody who didn't notice, last year, the year before, it's time to really be conservative, to figure out as we always say, what you're going to do in your investment accounts for the worst case scenario. What happens if Greece defaults and the markets corrects twenty percent in the next two months? Are you prepared for that? If you are, great. If you're not, get conservative. Now. Jill Schlesinger: Okay, so we're going to watch this stench from Europe, going to make sure you check in with your portfolio and reallocate, and most importantly, remember that these things are going to continue to happen, especially since this is a fragile recovery, as you said, so it is okay for investors to be a little bit more defensive right now. And be prepared for perhaps any outcome. And so, that's really the most important thing here is that right? Jack Otter: Absolutely. And I would give one more bit of advice, and this is my old thing. If you think emerging markets over the long-term are a great opportunity. They ran up so quickly over the past six, eight months, if something bad happens in Greece, maybe they'll really correct and that could be a great entry point for long-term investors. Jill Schlesinger: So that stench might be an opportunity, and that's your Reality Check. Thanks for watching!