European currency collapse, and the economy in general...

The Telegraph thinks so.

What will happen if the fears of the article come true? What sort of ripple effect can we expect here in the States?

I’d also like to ask a more general question: for some reason, it seems to me that the economic fear lately, especially in the media, has been muted. Perhaps we’ve gotten used to instability and nervousness about the next crash, but it certainly seems that the recent stock market plunges and other signs of chaos have been met with at least somewhat less absolute terror than the initial phases. What might this mean, if anything, for both us Joe the Plumbers (sorry) and the economy in general? Has your outlook on the future changed at all? What more needs to be done? WILL it be done? Would it matter who wins next Tuesday?

I don’t have anything to contribute, but that’s an eye-opening article. I was wondering why there seemed to be such flight to the dollar.

This might be good for the US because if people are scared away from emerging markets they will have to invest somewhere and the US market has been safer than emerging and growing faster than other first world countries. The decline in the dollar has been good for exporters and bad for importers. If the dollar goes up this will be reversed. This would cause a temporary bump in unemployment as the sectors realigned. Also gas prices would continue to go down if the dollar is strengthened. As much as one third of the recent run up in gas prices was currency related. Low gas prices are generally good for the US economy.
There is nothing a US president could really do about without screwing things up in the long term. There is very little the heads of Europe can do about it. Bubbles grow and then they pop. The economy suffers for a little bit and then things go back to normal.

This has actually already happened and is continuing. Investors abroad tend to feel that, whatever the trouble in the American economy, it is fundamentally sound and more stable than their local ones. The same would happen with a Euro-collapse.

The downside is that we’d be swamped by cheap imports again. Which itself is both good and bad.

The Telegraph is on a roll. A few days ago the financial crises was “the worst in human history”, notwithstanding such trifling matters as the fall of The Roman Empire, The Black Death, WW-II and other minor catastrophes.

The Danish currency is pegged to the Euro within a narrow band. Denmark has one of the most healthy economies of Europe, but still the national bank has already been forced to spend half of its currency reserves to defend it and raise the rates twice. It seems the only thing considered safe enough for investors is gold stored in Swiss bank vaults. This and then Volkswagen stocks.

If the Euro crashes, the US economy will take a major hit. The EU is USAs largest trading partner. If the EU overnight suddenly will not be able to afford any US products you would be thrown into an economic depression.

Good point.

The Dollar has gone up incredibly against gold in the last month. Methinks that the Dollar is more attractive(lately) than gold. Stick around, it changes every day/week. :smiley:

It’s probably a bit more complex than that. The US economy is the engine that drives the world. It’s that big. The decline of the Euro and the lack of Europeans buying our products will be a result of the worldwide recession/depression, not the other way around.

Canada is the largest destination of American goods (21%) followed by Mexico (16) and China (5). Import wise it’s China (16), Canada (16) and Mexico (11).

I can’t find a complete list of countries so it is possible that the aggregate EU import/export profile is bigger.

The eurozone overtook the US as the largest economy in the world some time earlier this year, when the dollar slumped. But perhaps you have gained the upper hand again now that the dollar is rising to the Euro.

2007 GDP; US: $13,843,800 billion dollars. Eurozone: 8,847,889 billion euros. At a conversion rate of $1.5688 dollar to euro (which it reached in March), the euro zone’s 2007 GDP equates to $13,880,568. But today the euro trades at 1.2683 so I guess you are top dog again. You might also say that it’s dirty underhanded cheating to compare the US with the 15 countries of the Eurozone.

Maybe those numbers don’t include services? Anyway it used to be true that the US and Europe were the largest trading partners in the world. Seems it still is:

The European Union and the United States have the largest bilateral trade relationship in the world. The size and importance of these trade ties make the EU and the US the key players in the global trading system.

Health Warning:

I don’t know enough to judge the article but I do know that the Telegraph saying that the Euro and the EU are going down is like Fox News saying the Obama is bad for the US.

I read somewhere that the IMF is in the process of putting together a package to bailout the developing countries, possibly using funds from China. Can’t remember where I read it though.

Top Trade Partners (Warning PDF

Federal Reserve Trade Weights

The Euro area is our largest trading partner, and that does not include the United Kingdom, Sweden or Switzerland and the emerging economies of central and eastern Europe.

So that is a scary article. So while our financial markets ran from Latin America and Asia in the late 90’s and into the sub-prime mess (here is an interesting map from the Fedby the by - what the hell is happening in Florida? 22% foreclosure rate?!?!?), Europe’s finance gurus took up the slack in the emerging markets, and now are getting the hit this time?

I can easily see a 20% contraction in the global economy over the next year - exactly how that translates into unemployment, commodity prices and credit availability, I can’t say, but they will get worse before they get better.

I think global food prices are going to see-saw like crazy for the next few years also. Farmers who planted expecting record high prices are going to see record low prices at harvest - leading to bankruptcies and shortages next year which will drive up prices again. Sustenance farmers may do okay, but speculators are going to get hit hard.

Is anyone talking seriously of a true collapse? Wouldn’t it more likely be an adjustment similar to what the dollar has been undergoing pretty much ever since the end of Bretton-Woods? I did hear the same theory recently on an NPR report, namely that as bad as things might get in the U.S., they were expected to get worse in Europe. Still, the upshot to be anticipated would be the usual perturbations of the import-export trade, whereby American exporters would be hurting, but some American consumers and might rejoice at the prospect of cheaper European travel and wines. Some people on both sides would be devastated by adverse business effects, but it didn’t sound to me like something that would lead to a collapse of currency.

That’s harsh. It may be nicknamed the Torygraph, but it is not just an unthinking conservative mouthpiece. The article also raises concerns about Britain’s exposure to the crisis, and talks about European countries outside the EU.

As a side note, quoting from a Telegraph article about the future of the Euro is much like basing an argument on Obama not being fit for office on a Fox news article.

EDIT : Ahh, posted without seeing yojimbo’s comment but he does have a point in that it is probably the most anti-euro (not anti-European) newspaper in the UK.

I wasn’t trying to dismiss the article I just wanted to point it out to Americans who may not be aware of the political leaning of the Telegraph.

It may very well be spot on.

the Telegraph would certainly like to see the Euro fall apart, if only because it’s been forecasting it repeatedly.
Greece is the speculators’ main target - it shouldn’t have been allowed to join the Euro in the first place, and it was only let in by blatantly ignoring the criteria.

For that matter, Fox is frequently more accurate and willing to muck about with the gritty details than other news services, but are, of course, overly sensationalist.

It does read like massive and selective over hyping (not how the UK exposure to emerging Asia is slipped in as an almost afterthought. Since UK banking is rather more exposed to overseas markets, and in particular emerging (it seems odd to me to talk of Poland as ‘emerging’) markets, much of the argument works as well on worrying about Sterling as Euro.