Is the US economy protected from the Euro Crisis?

 

Since the Euro crisis started three years ago, a number of measures have been taken by political leaders in Europe to stem it. None have been truly effective and they certainly haven’t convinced investors that the investment climate is right again. Europe has kept Americans on their toes, not really daring to invest until some kind of solution was found. It hasn’t been found yet, but how much impact does the Euro crisis really have on the US economy, that’s dealing with hardships of its own already?

There are many ways in which a financial crisis in Europe affects the American market. U.S. banks are exposed to the European debt, export will diminish and American consumer confidence will fall. This seems to give a bleak prospect for the US economy if the European one does crash. In this globalized world, what happens in one part of the world automatically affects the other parts. But will the U.S. really suffer that much from the Euro crisis?

Not necessarily. Two main reasons for that: American banks are healthy at the moment and are better capitalized than their European counterparts. And manufacturers have been directing their attention to the domestic market. Moreover, the countries in Europe that are actually really doing bad are mainly the southern ones, Greece, Spain, Italy and Portugal. American export to these countries consists of only 3% of the total American export. Which means it wouldn’t be a disaster if that were to disappear.

Yes, the US would probably suffer some kind of short-term economic dip if the euro were to crash, but nothing it couldn’t get over quickly. The Euro crisis shouldn’t be seen as a threat to the US economy, but as a lesson. Why did Greece, for example, almost go bankrupt? Because of years of overspending! The only thing keeping the EU on its feet is the counterweight of the Northern countries, Germany in particular, who have been doing very well. The US doesn’t have a counterweight like that, but it IS overspending and adding to the national debt constantly. What will happen to the US economy when they are unable to pay off their national debt? Interest rates will rise, inflation will rise, financial crisis will be looming!

So America, take a lesson from Europe. You are protected from the Euro crisis; you just need protection against yourself. Start getting rid of your national debt before it’s too late. Take the necessary precautions, but at least partly step off the fiscal cliff. Don’t procrastinate like Greece did, or you’ll end up like they did!   

Reference:

http://money.usnews.com/money/business-economy/articles/2012/08/17/is-the-us-economy-protected-from-the-euro-crisis