NEW YORK (TheStreet) -- Markets are down around the world in reaction to the latest in the Greek debt crisis and investors are wondering what they should be doing. First, they should take another, closer look at the main players.
Imagine there's a man named Aristotle. He's not a bad guy really, but just a bit, you might say, disorganized. He often fails to pay his bills, is lax with his taxes, does not fully understand that when you borrow money it must be repaid in a timely fashion. He doesn't work particularly hard (he enjoys life in the plentiful sun), and sometimes he needs to indulge in not the straightest forms of business practices just to get by.
Meanwhile, there's another man named Goethe, who is generally a law-abiding citizen. He does usually pay his taxes, repays his debts and generally effects transactions at arm's length subject to the rule of law. There are no bright beaches where Goethe lives, so instead he works pretty hard.
Now let me ask you, would Goete want to get into a business partnership with Aristotle? Even if he wanted to, can he establish a stable relationship?
Well, cruel though it may be, you can substitute Goete for Germany and Aristotle for Greece. Why in other words would Germany want to be an economic partner of Greece? People will say the above cultural stereotypes are exaggerated, even unfair, or they may say there are historical reasons for Greece's troubled economic practices (linked to the long history of abuse of Greece by imperial powers).
However, causality is not the same as culpability. Greece (just like other failed states) must take responsibility for its actions at some point and cannot blame imperialism forever. The fact remains that culturally ingrained patterns of economic behavior in Greece (as compared say to Germany) make the former a highly inefficient economy relative to the latter.
So does all of this mean that sooner or later the Germans/French and other richer countries within the eurozone will force Greece out, or that Greece itself will simply chose to opt out given the austerity constraints imposed on it by other euro members? Well, matters seem to be coming to a head -- but it's still not clear. Yet another debt forbearance scheme of some kind may be emerging (perhaps). Now a referendum in Greece seems possible and meanwhile banks are closed and capital controls are being imposed. Greece may or may not stay in the euro, it may or may not stay in the European Union, and debt restructuring programs could continue for some time (or not).
All this crescendoed into some real market turmoil on Monday - a significant correction in S&P500 (over 2%) and in the Dow (just under 2%). So the big question for your average investor is how do you react to this deeply knotted puzzle? What portfolio adjustments do you make?
Well, in spite of some short term turbulence, the best answer is: It perhaps no longer matters very much. That is, it matters a great deal to the Greeks, but for most U.S. (or even non-Greek European) investors Greece has already been significantly taken out off the financial equation. Commentary from Bank of America Merrill Lynch (BAC) , Stifel Nicolaus, The Wall Street Journal and certain prominent fund managers has been making the same point.