AriseTV Xchange (March 2, 2015-Part 1)
On this special edition of Xchange, AriseTV interviews Michael W. Conway of the Conway Wealth Group on the Greece bailout.
Speaker 1: Welcome back to a special Arise Xchange, My Big Fat Greek Crisis. You know, Greece makes up just two percent of the Euro Zone’s economy. Many American markets don’t consider it much of a threat to global stability right now, but there are reasons for American investors to pay close attention. Why we should care? Michael Conway is the founder and CEO of Conway Wealth Group and joins us here once again on Arise Xchange to talk about Greece and what the impact is.
So far we have not seen much of a reaction except some day to day blips here on the American markets. What is going on in Greece? Why this see no evil right now over what’s going on?
Michael Conway: I think the Euro Zone has made a lot of improvements over the last several years. You’re right, this past week the markets were fairly calm, all things considered. There’s a lot at stake here with what happens with Greece and if they stay in the Euro Zone or not. I think there’s a bit less worry about contagion if Greece does exit. So, we’ll see, but it has been fairly calm. I was even surprised to see that in the markets.
Speaker 1: Do you think that they’re going to stage what’s being called a Grecxit, because we have to create new words in the media all the time.
Michael Conway: I think that’s possible.
Speaker 1: What does that mean, by the way? When we’re talking about Greece. They’re not packing up and leaving the continent, so what are they doing?
Michael Conway: Well, what it means is if they don’t pay their bills in a timely manner that these things have been agreed upon with the European commission and the IMF and the ECB, then it’s possible if they default they would leave the Euro.
Speaker 1: And bring back their original currency.
Michael Conway: That’s right. The drachma.
Speaker 1: The drachma. Who would take that currency?
Michael Conway: I think that initially it would be very, very difficult. They would go through a tough time, which is why everyone is trying so hard to keep this together. If they were to exit, I think you’d see their currency could fall as much as 50% in value. I think you’d see the already high unemployment as high as 26% go up dramatically. I think you’d see high inflation. Over time, I think what would happen though is because the value of their currency would fall so much it would become attractive. You’d see foreigners coming into the country for a variety of reasons. Travel would be one thing, but an exit would be very, very difficult.
Speaker 1: If the Greeks did that, would that then mean a default on these loans and that they just will not be paying them back?
Michael Conway: That is correct.
Speaker 1: Basically that would set up a country, never pay it back, but then you look at Spain and Portugal and the other problem childs in Europe right now and they might say, “Well, why don’t we do this as well?” That is the concern, right? That the Euro falls apart.
Michael Conway: It is a big concern. When you look at what has happened with these anti-austerity measures and this new leftist government that has come into power in Greece, you also have little bits of this in Portugal and Spain. Not so much Portugal, but in Spain the polls are showing a leftist organization gaining a lot in the polls. They have the same feelings. Why should we pay our bills? There’s a discussion of, “Why should we pay our debts if Greece isn’t going to?”
Speaker 1: We’re talking about austerity. What does that actually mean?
Michael Conway: That means that, again … I talked before about the troika with the IMF and the European Commission and the European Central Bank putting restrictions on Greece. Those restrictions are cutting minimum wages, reducing benefits to the military, cut social spending-
Speaker 1: They spend a tremendous amount of money on a military and the only threat from Greece used to be Turkey and they haven’t invaded Cyprus in about 40 years.
Michael Conway: It’s been a while.
Speaker 1: It’s been a while and so there is an argument to pull back there.
Michael Conway: There is.
Speaker 1: Are you surprised right now- Germany just recently extended the payments by another four months to get things together. Are you surprised that Germany did that or did they not have a choice?
Michael Conway: No. They did have a choice, but very much … Germany wants to keep this together. We have the politicians in Germany that want to keep all of this together and they do not want to see Greek exit, but they do want the Greeks to pay their bills. The other interesting piece is the German people are fed up. They’ve had enough. They feel as though they’re footing the bill for basically a large portion of this problem, of the Greek problem. In fact, last week in one of the largest German newspapers there was Nein on the front page. No, no more to this money. We’re done. They even wanted people to take selfies and send them in. The German people have had enough and the Greeks have had enough austerity.
Speaker 1: In fairness though to the Greeks, the Germans are a little bit mercantile, right? They export a tremendous amount. The question is, is they need this scheme if you will of the Euro to support that, don’t they?
Michael Conway: They do. The Germans, as much as they complain, they’ve benefited greatly from this common currency and what it’s meant for commerce and their country. They do very much want to keep this whole thing together. They’re dealing with that while the German people are tired [crosstalk 00:05:35]
Speaker 1: Michael, we’re gonna have you a little bit back- Gonna have you back a little bit later in the show and I’m gonna ask you if you think there’s gonna be a third bailout here.
Michael Conway: Okay.
Speaker 1: So, think about that for a moment. Michael Conway the founder-