Bankers, governments and investors are starting to prepare for Greece to stop using the euro as its currency, a move that could spread turmoil throughout the global financial system.
The worst-case scenario envisions governments defaulting on their debts, a run on European banks and a worldwide credit crunch reminiscent of the financial crisis in the fall of 2008.
A Greek election on Sunday will go a long way toward determining whether it happens. Syriza, a party opposed to the restrictions placed on Greece in exchange for a bailout from European neighbors, could do well.
In the meantime, banks and investors have sketched out the ripple effects if Greek were to leave the euro.
They think the path of a full-blown crisis would start in Greece, quickly move to the rest of Europe and then hit the U.S. Stocks and oil would plunge, the euro would sink against the U.S. dollar, and big banks would uncover losses on complex trades.
So, as is our wont, let’s take a contrarian view. What’s the best case scenario? I haven’t seen that discussed anywhere. Since “everybody” expects the worst, how might “everybody” be surprised? When all the experts say the same thing, remind me, how often are they right? Oh, right. Never.