Wednesday, May 26, 2010

Where Will the Euro Go From Here?

My two cents......seems to be worth more than the Euro these days.  For those of you who don't check the Dow Jones at the end of business like I do, I can tell you that the stock market has taken some serious hits in the past couple of weeks.  Although the news of an increase in unemployment last month was partially to blame, in reality, we are seeing the results of what happens in an interdependent, global economy when one part of the world has an economic crisis.  The potential collapse of the eurozone is such a scenario.  Greece, amongst other countries, have been dealing with high levels of debt, which has caused strikes in their country, as well as major worries about the stability of the European Union.  In turn, this affects the economy on this side of the ocean.  Our stock market went from hovering around 11,000 to 10,000, all in less than of a couple of weeks. 

Just for those who keep score, this has been the growth of the countries in the eurozone since the 1970s [chart courtesy of CATO].  This is for those of you who think the Euro is the best thing since sliced bread:

That is nothing short of a downward trend.  There are two reasons why Europe's GDP has been able to hold on to the welfare state as long as it has.  For one, capitalism had helped Europe accrue lots of money in the 1950s and 1960s, although I'm sure the Marshall Plan helped a bit, in spite of increase of government spending it caused on our end.  The other factor is that Europe really hasn't had to worry about defense spending.  It has had the protection of NATO all these years.  Just as a side note, NATO might as well be a euphemism for "extension of the United States army because most in European armies can't do squat....except maybe for waiving a white flag."  Semi-jokes set aside, Europe has been able to put off facing its economic reality for quite some time.  But with what's going in Greece, Spain, Portugal, and Ireland, and I'm sure many more nations to come, we will see many Europeans questioning whether the Euro will remain a solidifying, economic force on the continent.  I'm not going to predict whether the euro is going to collapse at this time.  However, I will say if the bailout method that so prevalent in the Obama mindset is what the European Union is going to opt for in regards to solving economic disparities between the varying nations within the EU, I can safely reassure you that uphill battles will be aplenty as the EU moves forward.  Oh, and if you're thinking about investing in stocks at all, I'd wait a bit because this isn't over yet...........Dow is presently at 9,974.45.........and shrinking............

No comments:

Post a Comment