Or so goes the thinking.
But the problems at the root of the Greek debt crisis have in no way been "solved."
Both Greek and European Union leaders are guilty of not only kicking the proverbial can down the road but doing so, according to former German Economic Minister Karl-Theodor zu Guttenberg, "up a hill and wondering why it keeps rolling back on its foot."
I couldn't agree more strongly.
The entire premise behind the euro and the EU, in particular, is based on one of mutual economic strength through cooperation and a common currency. According to Bloomberg, Greece's domestic GDP was about half of Germany's in 2001 when it joined the euro. Now, it's 40% worse.
A Grexit is the only way out here.
Greece needs it to re-establish sovereignty and rebuild what little growth the nation has available to it. The EU needs that to happen because the European Central Bank (ECB) cannot continue to establish a buffer against future catastrophes forever.
That seems logical. Yet politicians are fighting it because they fear another country would make a break for it once a Grexit becomes a reality. My guess is Spain or Portugal steps up.
In that sense, the Greece debt crisis is a kind of "prisoner's dilemma."
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If you're not familiar with the term, the prisoner's dilemma is an exercise in game theory created in the 1950s by Merrill Flood and Melvin Dresher while working at RAND.
The premise, in a nutshell, is that the desire for a greater reward will cause a prisoner to choose to abandon cooperation with a fellow prisoner - even though cooperation is in the mutual interest of both.
Here's the scenario: Two gang members are brought in to a jail and separated...
Each is given the same choice of either testifying against his fellow gang member to gain his freedom or cooperating with him by remaining silent.
If Prisoner A betrays Prisoner B, he goes free while Prisoner B gets three years. If both prisoners stay silent, they both get one year. If they betray each other, they both get two years.
What the exercise shows is that ultimately they will betray one another because the stakes become so high that the benefits of betrayal outweigh the benefits of mutual cooperation.
Interestingly, studies show it doesn't matter whether the game is a single-shot variant or one played over multiple cycles. The outcome is always the same.
Sooner or later one prisoner decides the benefits of going it alone outweigh those of standing with the other "prisoners."
I believe that this is what Europe's ministers really fear, especially when the "tab" just went up.
Think about it... Greece missed the opportunity to declare a strategic bankruptcy on only €300 billion. The next time around it'll be €350 billion or more... counting the current bailout.
Until the EU addresses the now-apparent need for a Grexit, the Greek debt crisis will continue as a series of managed emergencies that lurch from one set of "fixes" to another. Ironically, the cost goes up each time.
Don't make the mistake of confusing monetary intervention with risk management. Instead, take the high road and steer clear of the political wreckage.
The market relief over the near-miss Grexit won't last. When the mayhem resumes, be sure you:
Follow Keith Fitz-Gerald on Twitter @KFGTotalWealth.
Keith on China: While the threat of a Grexit had investors distracted, the Chinese stock market was plummeting 30%. While most pundits are wringing their hands, Keith Fitz-Gerald has a different point of view - one earned from decades of closely following the Asian giant. Here are five realities that put China's market rout in perspective...
About the Author
Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.