Gordon Brown was recently quoted as saying that if the Euro collapses, the results will be “catastrophic.” It could happen. The European Central Bank (ECB) has shown no willingness to bail out Italy or any Eu member at this point and Andrea Merkel of Germany has given signs that Germany will leave the Euro before she gives in, making the bailout impossible, because it would require Germany’s approval.The reason – the problem is too colossal.
Eu countries believe the ECB will step in with an influx of cash and are merely playing a game of chicken in order to force Eu members to reduce the size of their expenditures. Time will tell, but so far the ECB appears to work by a set of principles which are much higher than those of the U.S. and the U.K.
The Eu survives on the backs of Germany and France who are now experiencing some of their own problems.
What happens if the Euro falls? There will be a run on banks and it could take down the U.S. banks. The market will crash.
People will look for safe havens, such as ETF’s like gold and silver. The U.S. dollar might temporarily provide a haven, but it would likely be temporary. The infusion of cash in a weak dollar would cause inflation as would skyrocketing import prices. Then the dollar would become less attractive.
Uncertainty and high interest rates could occur if demand for Treasuries decreases and that would strangle business growth.
Unemployment might worsen, sending the U.S. back into recession or even creating a depression. Our ace in the hole is that the countries who can sell off our dollar, such as China and Japan, don’t want us to fail because their economies are tied to ours, but that might be changing as they look for other places to invest.
Our dollar and treasuries are weak because of a faltering economy, high sustained unemployment, an unstable banking system, poor monetary policy such as Quantitative Easing,* and because of a failure of our government to find a solution.
Our greed has left us in a precarious position with China, a country whose own banking system is fragile. We owe China and many other countries a great deal of money. We can’t exist without their money since 40 cents on every U.S. dollar spent by the government is borrowed. In addition, we have significant trade deficit problems.
Then there is oil and gas, which our administration refuses to develop in this country or Canada, making us more dependent on countries who are at war and who hate us.
Now the Feds are even suggesting another Quantitative Easing (printing funny money), which devalues investments. Quantitative Easing (QE) angers investors and lenders who don’t like to see their money devalued after the fact.
The dollar will probably not crash but will continue its gradual decline unabated.
China and Russia have both announced that, instead of trading in the U.S. dollar, they will use their own currencies. The U.S. dollar has been the reserve currency of the world and we wield a great deal of power because of it.
China and Russia are justifiably infuriated by the devaluing of their loans to us through QE and they don’t trust us to not keep doing it. Other countries agree.
QE benefits corporations who can now sell cheaply overseas but it hurts the middle class whose investments have gone down because of this devaluing.
What happens if both the Euro and dollar collapse? There is talk of a global currency.
The IMF suggested calling the global currency the BANCOR and it would involve a Global Central Bank, which is something this current administration has indicated they would consider.
If that happens, what do you think becomes of our individual sovereignty? Our power as a nation comes from our currency.
We can’t forget the consequent effects which could include massive unemployment, riots, crime, and other worsening social problems in Europe and the U.S. The unrest in this country with the Wall Street occupiers is contrived, but they have set a stage for riots under worsening economic conditions.
Where will people go to secure their money? The last safe haven could be Canada, a country which straightened out there problems to a great extent. They are not in a recession, and they have an allegedly failure proof banking system. Canada did not have a “stimulus” like ours, instead they had a much smaller stimulus which included cutting tax rates and regulations. Canada is creating jobs and their debt has risen only slightly. They also have oil and gas.
Will Canada be the last man standing?
*Quantitative Easing or QE weakens our dollar because it is basically the printing of funny money