EU is the USA's greatest trading partner. The USA will never allow the USD to appreciate with respect to the EUR to such an extent. They will help to prop up the EUR so as to avoid a recession in the USA. It won't fall below 1.2
No, China is not their greatest trading partner. The EU as a block however is. The key is who the USA exports to, not who they import from. If the Euro collapses, the USA's source for exports reduces. This messes up the trade balance and lowers the USAs GDP. This is a key reason why the FED is keeping the rates low. They don't want the USD to appreciate.
Yes, you're right. And so will China and all the others too... Germany won't let the EU fail either though, so let the EU's tax dollar pay for their overspending. It's not like Lehman where another company may or may not take the bait.
I beg to differ. There could, maybe, be a short-term drop, but if Greece goes, the euro would definitely go up longer term. In my mind, the only question is the short term. I'm quite certain, and I freely admit I could be wrong, that the ECB has figured out how to keep the banks afloat come whatever contagion there may be. That's really the key. And since Portugal has also been long known to be a basket case, I'm sure they can deal with that. Beyond those two, I'd put the odds in favor of your side of the argument. What happens to Spain & Italy is going to depend on how their governments deal with their respective messes. I think the institutional folks know this & can separate Spain & Italy from Greece & Portugal. They both, however, have interesting regional problems: the Northern League in Italy's case, which is the voice of Milan, the city the rest of Italy lives off, and Catalonia, which really means Barcelona, which actually is far more economically viable than the rest of Spain, and knows it, in Spain's case. I'm not sure you could say the rest of Spain lives off Barcelona, but Spain's certainly not shy about sucking as much of its wealth out of it as it can get away with without causing an actual civil war to break out. IMO both Milan & its surrounding territory and Catalonia would be better off splitting from both their "mother countries" and the euro, and establishing their own currencies, but that's another thread entirely.
Good words. I'll add to the perspectives, that nobody likes how close the gap is between the Euro this year/Greece default and Italy/Spain paying their bonds. When it's settled, I hope the boys in Berlin either reposes Greece or make clear that the super socialism has got to stop.
Why is a Euro drop considered failure? There's a way to balance the perils of socialism with the evils and trials and tribulations of capitalism. That's usually what happens to fiscally irresponsible countries and the free market will sort them out. You have my word. If the distinction between European Communism, Socialism, and Welfare Statism isn't the deciding characteristic between the Euro and King Dollar, I don't know what else is. <b>This is a SOVEREIGN DEBT PROBLEM! NOT A PRIVATE LIQUIDITY PROBLEM, and I will continue to say the difference between US and Europe is exactly 156 times worse because it is government corruption coming home to roost, whereas the failures of one individual market of CDS credit market making activities is far less of an issue than European Government Failure. There is no parralell between the US and Europe. Their problem is failure at the governmental level, which is far worse than Credit Default Swap payments coming due out of illiquidity, entrenchment, and outright valuation fraud by the likes of corporations like Credit Suisse. If the US fails, the entire world fails, and we can let Europe fail because they have still been corrupted by Evil Socialism. Capitalism is not evil, socialism is, though, and whenever the differences of what has caused the failure is discussed I hope that this sole characteristic between Soverign Debt Failure and Private Debenture failure is looked at with a great pair of specticles, because this is failure of government, not privatized lending. That is a much bigger failure in magnitude than any bail out we could have ever done domestically, so if European Democracy has failed it is because of the remnanat of Hitler Neonazi fascism, traces of communism, and elitist welfare big brother style cronyism.</b>
Germany is just as guilty: they got to sell their stuff to the rest of Europe without the dm, which would have been rude enough to, you know, go up and make all those German cars too expensive for the Greeks and all the rest. It was a full employment program for Germany. Remember, they (and France) were the first to break the stability pact and run a deficit of more than 3% of GDP. Spain, among others, was not happy about that. This was back in the early 2000's, around 2003 or so. Now, with the sanctions for breaking that pact having been relaxed because of their own actions, the Germans are trying to limit the sovereignty of Greece. Not going to happen. Memories are long enough to remember who broke the pact first.
Beau, the EU is larger economy than the USA. The result of letting the EU collapse is just as severe as letting the USA collapse. Neither one will collapse. They will support each other. They have no choice. It is much easier to find a new source to buy your goods than it is to find a new place to sell your goods. The USA can let China fail; they can't let the EU fail. China can't let the EU fail either. China can't let the USA fail. Too much interdependancy in this world for any one large nation or block to fail. They will support each other. They have no choice.