The IMF loans to Greece

This afternoon it was announced that the International Monetary Fund approved a three-year $38 billion loan to Greece.  The loan is the single largest amount ever given by the IMF to a single country.  The loan is a portion of the monies being lent to Greece, with the rest coming mostly from members of the European Union.  Like other discussions involving Greece right now, strict restraints are being placed on Greece and its governmental spending.

Two questions come to my mind:

1.  Will the efforts of the EU and the IMF be enough to calm jittery investors?  If the efforts are enough then expect the financial markets to rally in a big, big way.  If they are not enough expect the financial markets to fall in the short-run.  But in the long-run expect U.S. financial markets to do very well.  This is because there is likely to be a “flight to quality.”  That is, investors around the world will shift out of other investments and into the U.S.  If you are a currency speculator then this will likely result in the dollar strengthening vis-a-vis other currencies.

2.  What will happen to Greece?  Under far less austere budgets the country of Greece has teetered on the edge of anarchy and mini-revolution.  Now with austerity being seemingly inescapable it seems as if some sort of discord is inevitable.

Jason

P.S. Happy Mothers Day to all of the moms out there.