To briefly address the concern many investors are having, I don’t believe that either the Greek crisis or the collapse of China’s stock market will ultimately hurt the U.S. economy.
As economist Scott Grannis pointed out in his informative blog post (“China stock crash: index up only 72% in the past year): “China is not collapsing, it’s learning how to deal with prosperity.” He further cautioned investors that “ instead of worrying that the collapse of stock prices is going to trigger a collapse of the Chinese economy, I’d be thinking that what was a crazy-overvalued, bubble market just a few months ago is now coming back down to earth.”
As for Greece, if the debt drama in that country was truly posing a serious threat to the global economy it should be evident in the price of gold. Instead, what we find is that gold is singularly unconcerned with the goings on overseas. As the ultimate barometer of fear, gold’s failure to rally in the face of global market turmoil strongly suggests that informed investors don’t foresee a global recession anytime soon. I maintain that if gold isn’t concerned, neither should we be unduly alarmed.