The Greek Financial Crisis... It is all greek to me till now.

When I see the value of my portfolios drastically going up and down and actually more going down these past days, I knew something is happening in the wide world. We are all connected financially. Whatever happens in countries with strong economic group power, we will definitely be affected. My overall market gain was wiped off by almost 90% early this week before the EU announced its multi-billion Euro bailout package for Greece.

Now why a country like Greece is going on the brink of bankruptcy? I believe bankrupt means you cannot pay your debts. I fail to understand why you borrow so much in the first place if you cannot repay in the second place? Usually when one borrows money one will have a plan about repayment based on one's income unless one is suddenly incapacitated due to disease or accidents. When we borrow, doesn't it mean that we have to monitor our spending and perhaps find ways to generate more income to sustain ourselves?

Through my readings I found out that the previous Greek governments have been borrowing a lot and spent so much to pander to their voters. The public spending was bloated and tax evasion was rampant as a result they have built up massive budget deficit. Their expenditure is more than their income and they continued to borrow as if there is no end to the money flowing in. So when the time comes for them to repay those creditors, they suddenly find their coffers are empty.

The credit rating companies like Standard and Poor and Moody in April 2010, downgraded Greek government  bonds to junk and from there the creditors pull a stop and foreign investors start to shy away from investing in the country. No money, no services. And more importantly the feared "contagion effect" that will cause a financial tsunami in countries with similar large-deficit problems, what is grouped as the PIIGS ( Portugal,Italy,Ireland,Greek and Spain). The investors will also turn away from these countries and the Euro will fall. Imports from countries like the USA will be more expensive and recession will set in. USA which is trying to recover from the financial meltdown in 2008 will be affected as well.

So to avoid a similar domino effect following one of America's great investment banks, the Lehman Brothers' bankruptcy in 2008, the EU led by the thrifty Germany has decided to lend billions of Euro to Greece to pay for their debts at the same time to put in place austerity measures to prop up the economy. Some measures are so austere that some Greeks rebelled, rioted and burned their banks. Why is it  always the man on the street that has to suffer? The German tax-payers/voters are also unhappy why they have to fork out their hard-earned money to help the spendthrift Greek who they reckon will default on the loan anyway.

The Greek problem has been succinctly put as due to "Irresponsible borrowings from irresponsible lenders for an irresponsible lifestyle". They spend today as if there is no tomorrow. And what humiliation when one has to depend on the handout of one's neighbours to survive? This is also a good lesson for individuals to heed.

In the meantime investors' confidence is shaky and very much dependent on short-term news, activities and development. One day I see my gain  shoots up only to fall the next. You cannot create sustainable wealth in this volatile environment.

And how I wish the political leaders would be more responsible in managing their countries and stamp out those corrupt practices which lead to unfair wealth distribution and injustice. Malaysian politicians please note because we can still afford to spend like nobody's business now as the oil is still flowing but please do not stretch it!

The oil will stop and it is a question of when not if.