Downloable version (pdf) of this article

Recently a woman was removed from a “quiet car” of a passenger train.  Her offense?  Sixteen straight hours of talking on her cell phone whilst her fellow travelers tried to sleep, work or just get through the commute.

While that episode was no doubt painful for all involved, the impact of the obnoxious talker was extremely limited: one car of one train.  I don’t doubt that those that had to listen to her ongoing dialogue would argue that the pain is being understated, but it’s fair to say that her offense had no direct impact on the rest of the world.

Regardless of whether this woman is ever allowed to use public transit again, the world will move on largely unaffected.  The same cannot be said for the financial outcome of a relatively small cog of the mighty European Union: Greece.

Once upon a time, a few thousand years ago, what happened in Greece made a huge impact on the rest of the world.  Of course, a few thousand years ago the Greek empire controlled a huge portion of the then known “civilized” world.

If one flashes forward a couple dozen centuries, one will find that Greece is now roughly 1.9% of the European Union’s GDP.  No one stays on top forever – just ask Italy.  Or England.  It is probably not politically correct to state this aloud, but the impact of the U.S., which has dominated the post WWII era, will wane as well.  How fast and how far the U.S. falls is open to debate and will be decided over the years to come.

Most of us have learned the recent news regarding the ailing economies within the EU (Spain, Ireland, Portugal and, and of course, Greece).  A normal reaction from a typical American to this news can probably be summarized thusly: 1) that’s Europe’s problem, not ours, and 2) what’s bad for the EU is probably good for us.

Unfortunately, Greece is not the talking woman on the train.  What happens to Greece will definitely have a direct impact on the Greek people and the EU.  But it will also have a direct impact on the U.S. banking system in general, and money market funds in particular.

Wait – money market funds?  I thought the SEC made them “safe” with last year’s changes to Rule 2a-7 (limiting maturities, increasing cash on hand, etc.).  Isn’t part of the reason I’m happily earning essentially nothing within my money market account is the fact that it’s safer than other options (including stable value funds, bond funds, etc.)?

While the rules have been tweaked, U.S. banks— and corresponding money market deposits—remain directly tied to the European banks that purchased enormous amounts of Greek debt.  Just ask J.P. Morgan, which estimates that $600 billion of European commercial paper and certificates of deposit is held by U.S. prime money market funds.

To put it another way, about half of the assets in U.S. prime money-market funds are in securities issued by European banks.

No interest and 50% exposure to the financial health of the EU – I wouldn’t want to be a money market salesperson.  To be fair, just about every part of the financial market currently has what appears to be heightened risk.  Please take the time to investigate the potential exposure to the EU within your portfolio and take whatever steps make sense to you.  Unlike the non-stop talking traveler, I think we’re all in this together.  Even if we don’t eat the yogurt.

Marshall J. Cobb, CRSP, is president and founder of Cobb Retirement Solutions, LLC., an independent, fee-only firm offering qualified plan analysis and oversight exclusively to corporations and organizations. Cobb’s first-hand knowledge as a veteran representative of retirement plan vendors beginning in 1990 gives him a unique perspective as he advises his clients.  Cobb runs his office -- based in Houston, Texas -- with employees and clients across the country.