Wednesday, April 7, 2010

Greek budget ripples continuing to be felt

Greece is continuing to affect the value of the Euro with its sovereign debt problems, while also giving investors a glimpse of what could be things to come if other nations, such as the U.S., end up on a similar path in the future.

A Wall Street Journal report noted that early this week, the cost of insuring Greek government debt went up significantly, in part due to questions about whether the country will require a bailout from the International Monetary Fund and whether it has the resources to funds its own budgetary needs at this point.

The financial newspaper noted that the yield on Greek 10-year government bonds was up to 7.1 percent, which was said to be 3.97 percentage points higher than Germany's. The Journal also cited concern among investors who have noticed a trend of wealthy Greeks withdrawing their money from the country's banks, which could result in a decline in available capital.

While U.S. officials have long downplayed the idea that the government will ever default on its own credit obligations, the country already spends hundreds of billions of dollars each year just to pay interest on the national debt.

Given what may eventually prove to be an unsustainable financial climate, investors who consider dealer gold may find themselves better shielded from any fiscal instability in the coming years.