5 Articles to Help You Understand What's Happening in Europe

Europe is in trouble. Big trouble. That's likely what's been causing fireworks in our stock market lately. If Greece and a few others default, a slew of European banks that hold those countries' bonds will be thrown into woe. Once a country's banking system is in distress, the rest of its economy suffers, exacerbating its sovereign debt problems. It's a vicious cycle that America is painfully aware of after our own -- albeit very different -- financial crisis in 2008.

American banks like JPMorgan Chase (NYSE: JPM  ) , Citigroup (NYSE: C  ) , and Bank of America (NYSE: BAC  ) have, by and large, insisted that their exposure to Europe isn't threatening. Federal Reserve chief Ben Bernanke said last week that American banks' European exposure is "manageable relative to their capital" -- a nice response, even if it's one he's obligated to give lest he cause a panic. Since so much of the financial system is opaque -- and, more importantly, built on confidence -- no one can say what might happen. Warren Buffett's quip that "It's only when the tide goes out that you learn who's been swimming naked" seems relevant here.

What should you make of it all? I recommend five articles that may help you better understand what's going on.

Fool contributor Morgan Houselowns B of A preferred. Follow him on Twitter @TMFHousel. The Motley Fool owns shares of Bank of America, Citigroup, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (14)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 12, 2011, at 1:08 PM, gridflash wrote:

    If you're not reading Ambrose Evans-Pritchard you're not getting the whole story.

    http://www.telegraph.co.uk/finance/financialcrisis/8755881/G...

  • Report this Comment On September 12, 2011, at 5:57 PM, xetn wrote:

    I believe this article pretty much sums up the problems in Europe and the US:

    http://mises.org/daily/5575/The-Fed-and-the-ECB-Two-Paths-On...

  • Report this Comment On September 12, 2011, at 7:57 PM, Sherbear50 wrote:

    Having just finished the first article I am at a loss for words. I am just a working stiff trying to eek as much out my savings by investing for retirement as I can. If the Greek (cradle of democracy?) gov. is that corrupt and the leaders of the European union are that stupid why should I assume ours are any better? I thought my wacky brother was nuts but now guns and gold are starting to look like pretty good investments.

  • Report this Comment On September 13, 2011, at 12:46 AM, aptosjoe wrote:

    Does anybody seriously believe that Greece can solve its problems in any meaningful time frame?

    Or that the European Union is something akin to the United States?

    Or that a European collapse will leave us unaffected?

    It's hard to be a value investor swimming against the tide, but I thought I could do it. Now after this... well if you think stocks are cheap now, just wait a few months or even years. The time frame for real recovery just seems too too long.

    On the other hand it's kinda like Pascal's Choice, if you're wrong it won't matter so buy cheap!

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