"Gold, stocks may fall once Greece deal approved"
"Bombay stock futures fluctuate ahead of Greece deal"
"U.S. stock futures up on word of pending deal" (I know, somewhat contradicts the first headline above)
"Soybean futures volatile ahead of Greece deal"
You get the idea. With headlines like that, anyone who doesn't acknowledge the breadth and interconnectivity of the global Ponzi economy, is in major denial. Greece is a country of a mere 11 million people out of 6.8 billion, yet the solvency of just that one tiny country is literally driving global asset price fluctuations, valued in the trillions of dollars. And the primary reason for that power is leverage. The globalized system is now so leveraged from Central Bank liquidity injections (QE1, QE2, ECB LTRO, Chinese RRR etc.) that small fluctuations and repricing in the nether regions of the global risk markets can cause massive, outsized reverberations across the entire globe. Imagine, a global financial system that now requires the ongoing fiscal prudence of the Greeks, in order to maintain its stability!!! (no offense to any Greeks, but that's a lot of responsibility).
In a liquidity driven environment, disconnected from underlying fundamentals, all asset correlations move to 1:1 and asset allocation decisions become binary: Risk on. Risk off.
And the real problem therefore is that Greece is not alone. Greece is just one of dozens of countries globally that has borrowed itself beyond the point of no return (including the U.S. which is somewhere along that line). Meanwhile, the fiscal cut backs (austerity measures) being forced on Greece make default absolutely inevitable, by exacerbating the economic downturn and reducing tax revenues. (Not to say that there is any long-term option, other than default). So Greece is only the first domino in a long series. Once that domino holds or falls, the markets will rush towards the next domino (Italy? Portugal? Spain? Hungary?) and await the fate of that country's bail out. Like a gun pointing at the head of the entire financial system.
Therefore, if global asset markets valued in the trillions of dollars are now so fragile as to be heavily influenced by some of the smallest and least fiscally prudent nations on the planet, then we have truly reached a stage where it won't take much more than for a butterfly to flap its wings in <Insert Country Here> to set off a global credit run.
