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Greece Is a Symptom, Not a Cause

The Greek national flag is seen flying above the parliament building on Syntagma Square in Athens, Greece, on Thursday, Feb. 16, 2012.
Bloomberg
The Greek national flag is seen flying above the parliament building on Syntagma Square in Athens, Greece, on Thursday, Feb. 16, 2012.

Greece is a symptom, not a cause. Excessive debt is creating a slower global economy and deflationary issues.

Today we are seeing:

1) Higher volatility and heavier volume in equities, here and overseas;

2) Big declines in commodities across the board (precious metals, base metals, energy — the Goldman Sachs Commodity Index is at a low for the year;

3) German bunds and US Treasurys at new highs; and

4) the US dollar up, Aussie dollar down.

You can call this the "risk off" trade, and it is. But it's a symptom of something bigger. It's about the debt problem. There's too much of it in the world.

Yes, I know. It never went away. It was the primary cause of the 2008 crisis. That's what started all those quantitative easingprograms from the Fed, the Bank of Japan, the Bank of England, and to some extent the ECB.

Flood the world with cheap money, reflate the global economy, and buy time for a recovery.

It worked for a while, but the strategy has not re-flated the world economy. Central banks have bought time, but not a solution, to the debt problem.

What is the solution? To produce more and consume less. Are we moving toward this goal? We have our answer in what just happened in Europe. The world does not want to hear it.

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