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
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
Jill Schlesinger: So that stench might be an opportunity, and that's your Reality
Check. Thanks for watching!
Discussion on Ben Bernanke
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Ben Bernanke cornering the Bond Market...
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