The Greek Stock Market Has Now Fallen Over 88%

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Here's a phrase you never want to hear: "worse than the Great Depression." Unfortunately, as Evan Soltas pointed out, that's the reality in Greece nowadays. At least when it comes to stock prices.

The Athens Stock Exchange has fallen over 88 percent from its November 2007 high. By comparison, the S&P 500 fell roughly 85 percent during the Great Depression. The below (slightly tweaked) chart from Soltas compares the two indices in the months following their cyclical highs. (Note: Data on the Athen Stock Exchange is from here; the data on the S&P 500 comes from Yale professor Robert Shiller).

GreekStockMarket.png


It turns out that hard money and austerity are a disaster whether it's 1932 or 2012.

There's really no silver lining for Greece here. It doesn't have quite the same escape valve that the U.S. did in 1933. Consider the sharp divergence between the above indices around month 45. The S&P 500 rallied then because FDR devalued against gold. Like that, the deflationary spiral stopped. But Greece can't exactly devalue yet. If it leaves the euro, it will face a choice between hyperausterity and hyperinflation. In other words, the barbarous relic that was the gold standard was much easier to get rid of than is the barbarous relic that is the euro.

I would say that this might be a good buying opportunity, except that Greek stock prices are at the same level they were back in November 1992.

It's been two lost decades for Greek stock investors. And the austerity isn't nearly over.
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Matthew O'Brien

Matthew O'Brien is a former senior associate editor at The Atlantic.

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