Okay, time to address the elephant in the room: Greece. You’ve probably heard this Mediterranean country mentioned everywhere lately. Over the last several weeks, as our markets vacillated wildly, Greece always seemed to be in the middle of the action. So, let’s review what’s been going on, where we are going and what it all means. And, believe it or not, it all starts with currencies.

A little history. Back in 1999, several European nations banded together and created a common currency called the euro. The euro was going to ease transactions between these countries, known as the Eurozone, and be strong enough to rival the U.S. Dollar as a reserve (or safe haven) currency. And this has seemingly been the case. Because the euro was used by so many countries and represented so much GDP, it became immediately important and relatively strong. To some Eurozone countries, this meant that they now had a currency that was stronger than their original currency and it allowed them to borrow at much lower rates than before. This was the case with Greece.

In the years following the creation of the euro, Greece borrowed well beyond the maximum 60% debt to GDP ratio that was dictated by the European Economic and Monetary Union (EMU). And then, to make matters worse, it became clear that Greece was far more indebted than they let on. Then comes the world-wide financial crisis and Greece is on the brink of defaulting on its debt.

Over the next few years, Greece was the recipient of a couple of rescue packages as it struggled to repay its debt. Creditors were willing to write down some of the debt as long as Greece put in place stringent austerity measures. The hope was that as the world economies recovered, Greece would be able to grow its way back to fiscal soundness. Unfortunately, this did not happen. Over the last five years, Greece’s economy has shrunk dramatically and unemployment is still over 25%.

Fast forward to 2015. June 30th to be exact, and Greece has a 1.5 billion euro payment due to the International Monetary Fund (IMF). Negotiations for further debt reform break down and Greece misses the IMF payment. The country’s banks close their doors and restrictions are put on access to money. Then in a seemingly bizarre series of events, Greek Prime Minister, Alexis Tsipras, calls for a national referendum to vote on the debt reform package offered by the creditors. He urges the citizens to reject this package as it is too harsh, which they do. He then goes back to the negotiation table and offers a package that is even harsher than the one the Greeks just rejected. This second package is then approved by the Greek legislature.

As we sit today, Greece has approved reforms which pave the way for an 85 billion euro bailout. And, the Eurogroup has released emergency funds so that Greece can make the most imminent payments. However, there is still a long way to go before Greece is out of the woods. Its future holds more austerity and more aggressive revenue collection policies.

So, why is all this attention focused on a country whose GDP is about the same as Connecticut? Well, there are a couple of reasons. First, there’s the Lehman effect. This refers to the belief that because countries and companies are very intertwined, the default of one entity could cause a domino effect that takes down the whole system. This was the case when Lehman Brothers failed in 2008 and threatened the survival of several large financial institutions. For Greece, this may have been true several years ago, but I don’t believe this is still the case. Through the previous bailouts, most of Greece’s debt is held by the European Central Bank (ECB), the IMF or other countries (i.e. not banks).

The second reason brings us back to currencies. If Greece defaulted on its debt, there is a good chance that it would be kicked out of the Eurozone. And this would cause some instability for the euro. More importantly, it would cause great uncertainty. As this has never happened before, no one really knows what to expect. In the same way that no one knew how much disruption a Lehman Brothers bankruptcy would cause. Greece being forced out of the euro would send a message to the world that it could happen to other Eurozone countries. Which could be detrimental to the euro. The world was also watching to see what kinds of concessions the creditors were willing to give as this might set precedents for other debt burdened countries.

Overall, this situation is far from resolved. With much work to do by both sides (Greece and its creditors), there is little doubt that this issue will come up again. As was the case before, most of the bailout money comes in the form of loans that will be used to pay off other loans. This leaves little to help stimulate the economy. And without growth, it will be hard for Greece to break out of this cycle.

Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Verity Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.


Gavin Chinn, CUSO Financial Services Advisor at Verity

Check the background of this investment professional on FINRA’s BrokerCheck.

A Financial Advisor registered through CUSO Financial Services, L.P., Gavin has 25 years of experience as an advisor in the Puget Sound area.

“I believe every client is unique and deserving of a personalized financial plan that will help them reach their individual financial goals. Before I make any recommendations, I like to get to know my clients. By asking the right questions, and developing an honest, trusting relationship, I can really get a sense of what’s going to work best for them.”

Gavin graduated from the University of Washington with a BA in Business Administration and started his financial career with US Bank in the Investment Department. Prior to joining Verity in 2006, he spent eight years with Piper Jaffray.

So what is Gavin’s vision for his dream retirement?

“My dream retirement would be absolutely worry free: financially, emotionally, and in every aspect of life. My finances would be in order so expenses for travel, luxuries, and gifts for the kids, grandkids, and great-grandkids would be taken care of. My kids would be financially sound, so I would be confident in their prosperity. This would give me the freedom to travel and play and do whatever it is I want to do.”

When Gavin’s not working, he enjoys spending time with friends and family, watching Husky football and taking weekend trips around the Northwest.

Gavin is registered to transact securities business in the states of AZ, CA, CO, FL, HI, ID, IL, KS, MN, NV, NY, OR, UT, VA and WA.

*Non-deposit investment products and services are offered through CUSO Financial Services, LP (“CUSO Financial”) (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial. Verity Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members. Atria Wealth Solutions, Inc. (“Atria”) is not a broker-dealer or Registered Investment Advisor and does not provide advice. CUSO Financial is a subsidiary of Atria.

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