When the Crisis became Global...

The Greek Crisis Explained, Sep 2010

To NOMINT's eyes, Greece is a spoiled young girl and the dept,
once a lovely pet sheep, appears now to be a humongous creepy monsterabout to devour her.

source:http://www.youtube.com/watch?v=--TABdLsWSU&feature=related

Debt Contagion and the Global Economic Collapse, Jun 2011

source:http://www.corbettreport.com/sunday-update-20110626/

Greek's economy is over leveraged by debt. Earlier last year, corruption and book cooking got Greek into big financial scandal, and the following credit down-grading directly caused her this nation-wide financial crisis. Is fair-value accounting/accounting in general one of the drivers that push Greek off the brink of crisis? Maybe or maybe not. 

Some people are questioning that there are other countries with even more bureaucracy and corruption, yet didn't step into national wide financial crisis, why these European countries? The rationality that they are just victims in a international political contest. America faced the sub-prime mortgage crisis starting from 2007, which brought the world's most powerful economy into a big recession. As there came up more and more doubt over u.s dollars as the international currency, and the proposal kept gaining influence that u.s. dollars being replaced by another global currency, say euros,America was forced to defend the superior position of dollars, and down-grading EU member countries was just one of the weapons America used.But in my opinion, fair value did played a role in the Greek crisis. Compared to historical cost accounting, fair value accounting provides information that are more relevant and updated. However, the reliability of the information has to be compromised since the measurement are more forward-looking, which might opened the door for earning management/manipulation. Besides, fair-value accounting also increased volatility to financial statements.The value of assets sitting on Greek's balance sheet was forced to shrink dramatically after the credit down-grading,thus worsening the situation. Therefore, fair-value might not be the initial cause of Greek crisis, but it could be the last straw, just like its role in the 2008 subprime mortgage crisis.