Australian shares are right now thumbing new one year lows as investors exit equities in renewed fear over Greece and the great financial face-off.
Six weeks ago when the market was riding high people were warned of this. Remember? The market was getting way ahead of itself even as the future of the Euro was far from certain.
Political elections with the power to completely changing the face of the crisis were just around the corner. And they subsequently have shaken things up in no uncertain terms.
The warnings have come to fruition and we can expect tremendous volatility in a rollercoaster ride over the next couple of months as Europe tries to get its act together.
Today’s fresh lows should come as no surprise. The risk of GFC Mark II is still very much on the cards - all sparked by little old Greece and its impact on the world biggest trading block.
Sure it’s a tiny country with very little practical influence, but the psychological impact of a Grexit will be immense. Catastrophic to the Greek economy, banking system and consumers, the impact will be far more damning for the perception of the euro zone.
But what’s the local implication of the latest developments and the share market slide?
First of all its smashing super. Any account with exposure to equities, which is the majority, will be hit very hard by today’s and this week’s whack to shares.
Secondly the banking system is going to feel the chilly winds of change as borrowing costs soar as fear grips financial markets. Banks are already moving to shore up balance sheets by pulling funds out of international markets, the local effect of which will be felt by consumers in quick time.
But more generally, fear and panic on share markets like we’re seeing today isn’t healthy for anyone. the flow on effects are enormous. Financial fear breeds a herd mentality which eventually makes market dives a self fulfilling prophecy.
Rational thought goes out the window as consumers get back in the bunker fretting over what might happen.
Super smashed, borrowing costs ballooning, general panic and reluctant consumers all amounts to seriously bad news for small business.
All this just as a glimmer of light was sparked just six weeks ago.