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.
