Tonight’s program will spend a generous amount of time on Cyprus. That little country, about the size of Vermont with the population of San Diego, stole the headlines this weekend with – what else? – a story about a controversial plan to bail out its banks.
Why are Cyprus’s banks in trouble? Well, for one thing, they are and always have been a haven for hot money, much of it lately coming from Russia. For another, those banks got deeply exposed to Greek debt, sovereign and corporate. Not a good investment position to own over the past couple of years, shall we say?
At least through mid-day, the market damage here in the U.S. was relatively modest. But the fact that a banking shock in such a small country as Cyprus could unsettle U.S. investors reinforces how inter-connected the world economy and global finance have become.
Just last Friday, former Federal Reserve chairman Alan Greenspan told NBR that he thought the main reason U.S. stocks have moved so high, so fast is that our Euro-worries have receded. And then, in the very same “Greenspanian” sentence, he hastened to add that he thought the removal of Euro-risk was “only temporary.”
Little did he know, or we know, that this weekend, that risk would return big-time.
Tonight on NBR, we will have full coverage of today’s market news, including the Cyprus effect, and Susie will speak with Mohammed El-Erian, PIMCO’s always insightful CEO and Co-Chief Investment Officer. I will be talking with Nobel prize-winning economist and New York Times columnist Paul Krugman.
Two great guests in one great half-hour. I hope you will join us.