Is there a doctor in the house?

World financial markets are far from recovered. While the Germans try to administer very unpleasant medicine to Greece, other countries among the PIGS (perhaps they need a Vet) risk getting the symptoms of contagion. Yields on Portuguese national debt, for example, are heading north at an alarming rate.

It was once said that when the US sneezes the rest of the world catches a cold.
The credit crunch demonstrated the alarming truth of that. But the pressing issue now is one of rebound. If Greece effectively keels over (how can that be allowed to happen?), we all will feel the resulting impact on the global banking system. We just can't afford to have that level of destabilisation so soon after finally getting things under control again. The downgrading of Greek national debt to junk status by Standard and Poor’s is bringing havoc to markets with some traders privately admitting that anything that is offered up now is “too little too late.” Liquidity is fragile and this will do nothing to help the global flows of capital as banks will rush to protect their positions, shore up their capital adequacy and become paralysed while they reconsider new strategies. The flight to quality is in full swing.

If the PIGS were to go under the consequences for global capital flows would be profound and this just can’t be allowed to happen. No country in today’s world is isolated and the illness of one is felt by all.