European Union

5 Reasons Americans Should Care About the Euro Crisis

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  1. The US will lose its largest trading partner: The United States exports 184 billion euros to the EU and imports 260 billion euros a year in trade. If the euro collapses the Europeans won't be making as much, and Americans will have to buy the products typically made by Europeans elsewhere for higher prices. The European auto and technology industries will be hit hard. I for one am keeping a worried and keen eye on the wine and beer industries, which would suffer in a euro collapse despite the millions of Europeans who will turn to the bottle.
  2. The Fed will act: Central banks in the UK, China, and Europe have already recently engaged in quantitative easing and cut interest rates. Were the euro to collapse, or were Greece to exit the eurozone, the Fed would almost certain engage in some sort of stimulus, further hamstringing the United States' long term economic prospects.
  3. The American taxpayer will be asked to bail out Europe: Were the euro to collapse there would be a huge amount of pressure put on the IMF to plug the resulting hole in international trade. American contributions make up close to 18 percent of the IMF's funds, and American taxpayers would be the ones contributing to a European 'rescue'. It should hardly be of any reassurance that Christine Lagarde, the Managing Director of the IMF, has said that, "I can assure you that the IMF will continue to play its part in supporting the efforts made today to address the challenges facing the euro area and to restore growth to its full potential".
  4. Romney will get elected: A euro collapse will plunge the United States into a more severe economic crisis, and Obama would take much of the blame after Republicans capitalize on the fallout. While free market libertarians might initially relish the President's defeat in November, Romney would almost certainly do nothing different in response to a euro collapse and he would still engage in his moronic trade war with China and his protectionist agenda.
  5. You will be next: What is happening in Europe now is happening in slow motion on this side of the Atlantic. No amount of Fed activism will break the laws of economics. If Americans don't learn quickly from the euro crisis they can look forward to a future of Europeanesque problems and perhaps more frightening, European solutions.

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  1. Isnt #1 off a bit?

    If the euro collapses, european goods will be cheaper, so we will buy more of them, right?

    1. If the euro collapses, you can be sure that many factories will close. Those factories need Euro demand to stay open.

      Thus, less to export, even at reduced prices.

      And, of course, if it collapses, not only will demand for imported US stuff go down as their economy contracts, the prices of US stuff will go way up. It will be a huge hit to our exports.

      1. I seem to recall that when the Euro really took off, the cost of European imports (including, of most concern to me, beer and brewing ingredients) went up. So I would think that a strong dollar versus the Euro would indeed bring cheaper prices. I also recall that the company my dad works for, which manufactures band saw blades, started doing a ton of business in Europe which didn’t completely offset domestic losses but certainly helped. While I agree that factories closing poses a risk, I would still think that, on the whole, the result would be cheaper imports in the U.S. (But I’m no economist, so I welcome evidence to the contrary.)

      2. If demand goes down the prices of US stuff will go way up.

        If only retailers knew that sale prices reduced demand.

      3. The people that create that demand won’t disappear so its hard to see the logic behind the reasoning that a collapse of the eurozone means loss of trade with Europe.

    2. You think just #1 is off?

      I’m seeing just 1 out of 5 that makes sense to me.

      1) The US will lose its largest trading partner

      The things that can be made cheaper elsewhere will be, and if the reason that some of the things the Europeans make are cheaper is because government largess over there is subsidizing what industries and consumers should be paying for themselves?

      Then seeing those industries disappear that can’t compete without government support is a sustainably good thing.

      2) The Fed will act

      I predict the fed’s behavior will continue to be atrocious regardless.

      3) The American taxpayer will be asked to bail out Europe

      That’s the legitimate objection, and here’s the legitimate solution: just say no.

      4) Romney will get elected

      If the problem with Romney getting elected is that he’ll act just like Obama would, then why is that a negative? Why isn’t it just a wash?

      5) You will be next

      If we’re next, it will be becasue like the Europeans, we didn’t do anything about our spending until it was too late–not because of the Euro crisis.

      Incidentally, you should go take a look at what the Asian contagion did to our economy back in the ’90s. …everybody remember how horrible the American economy was after the Asian Flu in the ’90s? Oh, if only the economy were chugging along like that again!

      1. In fact, this piece is so far off, I’m starting to wonder Mr. Feeney is having a little bit of fun with us here.

        It reads like the list of reasons the New York Times editorial page would give for why we should care about the Euro.

        And read that way, the piece is freaking hilarious.

        1. This makes me suspicious.

          I for one am keeping a worried and keen eye on the wine and beer industries

          I don’t know about wine but who in their right mind would prefer rotten skunk beer from Europe when the best beer in the world of every conceivable kind is made here.

      2. There is no way we have the financial strength to even try to bail out Europe. All we could possibly do is agree to get dragged down the same drain. I think Romney and most of Congress would recognize this. Obama is so clueless on economics, there is no telling what he would do.

        1. We didn’t have the financial wherewithal to stop more than 400 banks from failing and some 5 million foreclosures either, but that didn’t stop Bush the Lesser and Obama from throwing money at the problem.

          I suspect the biggest deterrent to seeing our next president do something like that is the public outcry. If TARP provoked such a huge backlash by way of the Tea Party for bailing out misbehavior here in the patriotic U.S. of A, can you imagine the backlash against bailing out foreign governments?

          In Feeney’s defense, I don’t think most Americans understand what the IMF is. They don’t realize that the IMF is playing with the American taxpayer’s money, but with that in mind, someone should point out that the U.S. taxpayer has already sent a ton of money to Greece, especially, by way of the IMF.

          http://professional.wsj.com/ar…..66944.html

          Note a couple of things from that link…

          1) The U.S. is responsible for a share that’s bigger than its stake in the IMF.

          2) The money used for those bailouts was apparently borrowed from stronger central banks–including the Federal Reserve here in the U.S.

          So, just so you all know: part of your future paychecks are already going to bail out Greece. How’s it feel?

          Have a nice day.

          1. Feels bad, real bad. Like I should compare it to having my rectum violated with something real hot.

            1. Anger is a gift that not everyone gets.

      3. If the problem with Romney getting elected is that he’ll act just like Obama would, then why is that a negative? Why isn’t it just a wash?

        Although I’m not sure this is what Mssr. Freeney had in mind, my guess is that it hurts us because eventhough Romney would govern in a virtually identical way to Obama, in managing to fail even further, somehow the free-market libertarian brand would be blamed for the failure (see also: Bush, George W,).

  2. I would like some substantiation on the “moronic trade war with China and his protectionist agenda.” After all, right now I see more protectionist and trade war inducing comments from the current President and his party. Not limited to all the comments about outsourcing (which the President doesn’t understand is different from offshoring, not that offshoring is bad.)

    1. Yeah, on those fronts, the Romney/Obama thing is pretty much a wash. The only (relative) downside I see to Romney winning is the likely Republican control of Congress and the Executive. I don’t want either party ever to be in that position again.

    2. ya, didn’t this president already have a trade war with South Caronlina? (Boeing plant)

      Isn’t the #1 thing he won’t do about Health Insurance Costs rescinding the 50-way insurance trade war that we currently live under?

  3. And for #4…I say down with Kang, give Kodos a chance!!

  4. WTF? Romney will be elected is a reason to care?!?

    And how, Master Feeney, will that be an additional burden to the American citizenry?

    I’m starting to think that John is right when he asserts that you guys bend over backward to attack Romney on the flimsiest and most tenuous grounds.

    1. I think you’re misinterpreting. Obviously Romney being elected will have certain effects, and Obama being reelected will have others. He isn’t saying that a European collapse would be bad because Romney will be elected, he’s saying it’ll be important, partially because it will get Romney elected.

      1. Ahem:

        While free market libertarians might initially relish the President’s defeat in November, Romney would almost certainly do nothing different in response to a euro collapse and he would still engage in his moronic trade war with China and his protectionist agenda.

        They’re making a Romney would be worse argument.

        I happen to agree that Romney is, in the long run, a worse choice for my political agenda than Obama, merely because very similar disastrous policies to the disastrous policies perpetrated by Obama would be in force under a Romney administration and that people would assume that those policies were free market ones.

        But, that is largely irrelevant to the matter at hand. They are arguing that we should care because a Euro collapse will make a big bad Romney admin more likely. That’s akin to arguing you should change your oil so your date is less likely to be kidnapped because she doesn’t like riding in your stinky car so she might hitchhike.

        1. Since Obama has started wars on his own, they can’t argue “but Romney will get us into a war” anymore. So now it is “Romney will cause a trade war”.

          1. Romney is a hell of a lot less likely to start a trade war than Obama.

            Those sorts of wars are primarily championed by the trade unions…

            OK, who is more in the pocket of trade unions, Romney or Obama?

            1. His speech this morning following the jobs report was a bit of trade protectionism rhetoric aimed at China. He accused Obama of sitting idly by while China “cheated and stole American jobs.” I doubt he would really start a trade war wiht China and is likely just pushing this talking point as a way of deflecting Obama’s “outsourcing is teh devil!!1!1!” talking points vis-a-vis Bain, but it is noteworthy (and incredibly ironic because in the same breath he criticized Obama for not opening up Latin American markets, obviously through trade agreements).

        2. What part of your political agenda actually favors Obama over Romney?

          I’m no Romney fan, but damn, at worst he’s Obama lite. And if Republicans manage to get some decent reforms through Congress, he’ll sign them.

          And, he’s less likely to bailout Europe or California.

    2. WTF? Romney will be elected is a reason to care?!?

      And how, Master Feeney, will that be an additional burden to the American citizenry?

      We’ll be denied the awesomeness of Dear Reader

  5. Romney will get elected

    So Reason is shilling for Obama again? Well, I guess you need your cocktail party invites to keep coming. You will never learn will you.

    1. Some of them never will.

    2. “Romney will get elected.”

      And Big Government will replace Bigger Government.

    3. Oh, for fuck’s sake. “Shilling for Obama”, seriously?

      1. They do have a history, you know.

  6. European solutions? That is terrifying.

    1. don’t worry, they’re just final solutions. No worries!

    2. Indeed. Fascism will come to America. It’s just a matter of seeing which party, Republican or Democrat, has the balls to go full-on Beer Hall Putsch first.

      1. Too many people with guns. Beer Hall Putsch requires smashing up homes and stuff. I promise you it won’t happen more than once before groups of residents with shotguns strongly encourage them to go somewhere else.

        The blacks of Alabama did so in the 50s. The latinos of East LA did it in the riots. Thuggish violence is pretty much limited to the cops in America, and even they seem to know there’s a hard limit on what they can get away with.

        1. Territories. “We need to lock down Guam” – Guam only has a 4% gun ownership rate, or something like that.

        2. Too many people with guns. Beer Hall Putsch requires smashing up homes and stuff. I promise you it won’t happen more than once before groups of residents with shotguns strongly encourage them to go somewhere else.

          What if those doing the smashing are the U.S. Military? Shotguns won’t do much to IOTVs and Strykers.

          1. In all honesty, the US military does far too good of a job creating a mix of geographical, ethnic, and racial groups within its organization. Everybody’s someone with a cousin from somewhere in their unit.

            They also do an excellent job instilling the idea of civilian authority and separation of powers. It would take a generation to change at this point.

            Of all the scenarios to totalitarianism in the USA, a military run or backed coup is lowest on my list.

            1. The IRS in concert with a few regulatory agences will take over the government at some point.

            2. That’ll be a real disappointment to James Fallows, who openly prefers military coups in the US to have the Supreme Court rule against Obamacare.

              1. SF’d dude!

            3. They also do an excellent job instilling the idea of civilian authority and separation of powers. It would take a generation to change at this point.

              I hope so, but that there is a perceived need for a group like Oathkeepers tells me that they can still do an even better job of instilling those ideas.

            4. Outside of blogs like this one, you won’t a group of people with a better working knowledge of the Constitution than the NCO corps of American combat units – and some officers.

              National martial law just won’t work as a response to an internal threat.

              1. The police, on the other hand, would gladly orchestrate a coup and install a repressive, authoritarian regime.

                If only they weren’t so fat and incompetent.

  7. I’d be better if the Euros actually cared about the Euro.
    Whatever US citizens think about it, it’s up the the Euros to save it and they seem unwilling to do what it takes.

    1. Except Estonia.

      1. Save your kroons, the north will rise again!

    2. You would think the European financial crisis would serve as some sort of bellwether for the United Sates… *dies laughing*

      1. *States – though Sates works too

    3. The problem is that Europe is not one big country, despite the wishes of the eurocrats. Perhaps Americans are really a patriotic bunch, but I have never understood why somebody living in Florida would really care about what people are doing in Alaska, the same goes for Greece and Finland for example, the Finns really don’t much love or connections for Greece, other than having stupidly decided to share the same currency.

  8. Anyone else smell chum?

    1. Not here. He’s over in the carbon-tax thread, and getting chewed upon.

    2. I smell you whining about Giffords but not giving enough emotional support for the Euro.

      That is what I smell.

  9. the Fed would almost certain engage in some sort of stimulus, further hamstringing the United States’ long term economic prospects.

    Credibility, meet window. Yeah monetary stimulus in response to a large shock to nominal demand would jeopardize the longterm economic prospects of the United States. Are you out of your mind? That is an appropriate use of monetary policy. The longterm economic prospects of the United States are not jeopardized by the Fed (short term is different) but by excessive gov’t spending and declining economic freedom.

    1. Yeah monetary stimulus in response to a large shock to nominal demand would jeopardize the longterm economic prospects of the United States.

      When that monetary stimulus consists of financial repression that suppresses capital formation, then I would say, yes, it is a long-term threat.

      When that monetary stimulus fails (for a variety of reasons), then it is a long-term threat again, because it builds in distortion and inflation, or perhaps merely a brutal recession when it is withdrawn.

      The longterm economic prospects of the United States are not jeopardized by the Fed (short term is different) but by excessive gov’t spending and declining economic freedom.

      The Fed, of course, facilitates excessive spending via QE and interest rate suppression. And its no friend of economic freedom, either, with its bank regulations.

      For an organization that poses no long-term threat to US economic prospects, it sure has done a fine job of facilitating bubbles and busts, devaluing the currency, and presiding over a 30% reduction in the rate of growth (pre-Fed average growth was around 3% per year, post-Fed is closer to 2% per year, if memory serves).

  10. You will be next: What is happening in Europe now is happening in slow motion on this side of the Atlantic. No amount of Fed activism will break the laws of economics. If Americans don’t learn quickly from the euro crisis they can look forward to a future of Europeanesque problems and perhaps more frightening, European solutions.

    This whole blogpost has me scratching my head a bit.

    “I will be next”.

    You’re right, I will be next if we bail out Europe. It’s the goddamn bailing out that causes these problems. If we create a moral hazard in Europe by telling them, “Yes, your cradle-to-grave welfare states are safe and backed by the American Taxpayer, what incentive will Europeans have to change the European model?

    I’m getting to the place where it’s time for shit to collapse, even if it hurts me economically. It might be an opportunity for a new beginning around these parts.

    1. If Greece defaults on it’s debt, then the markets will start enforcing fiscal discipline on all countries and politicians won’t be able to hand out goodies while claiming they are keeping taxes low. That’s what the panic is about. Greece needs to either pay their bills themselves or be allowed to default, just like AIG Bear Stearns, and GM should have been forced to do.

  11. Europe is facing bigger problems than America, but that somehow does not mean America will be fine as long as Europe is fine. Much of Europe simply has had the welfare culture longer, America has been playing rapid catch up and will not be very far behind in terms of the same economic malaise.

  12. Romney will get elected

    Yeah it is Europe’s fault that Romney is going to win the election.

    What the fuck are you talking about???

    1. I could see Romney getting elected if Obama were to forcefully engage in a massive bailout of Europe. With the IMF doing it, we’re bailing out Europe through a middle-man that already exists which we already fund.

      But yeah, I don’t get the “and now a warning” subtext of Romney getting elected if the Euro falls apart.

      I don’t want Obama to get re-elected either. I’m actually in a state where I want neither Obama nor Romney to be elected, so what hypothetical scenario satisfies that vision?

      1. My complaint was i do not see how it is the Euro’s fault that Obama will lose.

        Even if one takes the position that a collapsing Euro is the straw that broke the camels back, Obama had 3 and a half years to do something right with the American economy. If he had not fucked up our economy so much for so long a little euro crisis could never have made him lose the election.

        I guess Matthew Feeney has been in Europe drinking shitty beer and did not actually notice that Obama has been the shitiest president in living memory.

        To come to this weird conclusion that it is Europe’s fault is mind boggling to me.

  13. #4 Romney will get elected: A euro collapse will plunge the United States into a more severe economic crisis, and Obama would take much of the blame after Republicans capitalize on the fallout. While free market libertarians might initially relish the President’s defeat in November, Romney would almost certainly do nothing different in response to a euro collapse and he would still engage in his moronic trade war with China and his protectionist agenda.

    Is this a foreshadowing of that “the libertarian case for reelecting Obama” we all know is coming?

    Assuming the candidates are equally bad, or that the degree of “lesser evilness” is insignificant, shouldn’t the default position be to see the incumbent ousted?

    1. The line of thinking around here is supposed to be they are both equally bad. If that is true, then why should anyone care who wins?

        1. Last I looked that was up to the states not the feds. And didn’t Obama spend the last few days in Ohio threatening a trade war with China? But it is Romney who is going to start one?

          This is why people think Reason writers are lefties looking for a paycheck.

          1. This is why people think Reason writers are lefties looking for a paycheck.

            John of the People!!!

            Anyway i do not think this article is leftist…there is to much weird shit in it. My guess is either Ken Shultz is right and this article is meant as a joke (yet failing as one) or Matthew Feeney just wrote a shity incoherent article.

            1. He should have phrased it “it may determine who wins the election”. Made a neutral statement.

              1. He could have written a coherent article as well…he did not.

                Maybe you are picking up some alien background signal that survived the big bang; that incoherent article often have a leftist bias…

                1. Or maybe you just don’t want to admit the article says what it does. How is “Mitt Romney May Win the Election” in that context anything but pejorative? And how is lying about Romney wanting a trade war with China and ignoring OBama’s saber rattling on the subject anything but leftist bias?

                  1. Cuz the whole article contain a bunch of other bullshit that doesn’t make any sense under any political lens.

                    Furthermore there are positive libertarian/conservative claims as well.

                    ie and perhaps more frightening, European solutions.

                    Calling European solutions frighting is not a left wing meme.

                    He gets all sorts of shit wrong. Sometimes a pile of shit is left wing biased….sometimes it is just a pile of shit.

      1. If that is true, then why should anyone care who wins?

        One can not care who wins but still think getting Gary Johnson as many votes as possible to signal to the other parties that there is a large voter group that can be approached is important.

        Anyway at the moment I think i would enjoy the left’s salty tears more then the rights salty tears…in that scenario i guess i prefer Romney.

        Still no fucking chance in hell he will ever gets my vote though.

        1. If that is true, then why should anyone care who wins?

          If you honestly believe there is no difference between the two, you shouldn’t care. It is really that simple. If reason wants to pretend that who wins matters, they better start explaining how one is different that the other and drop the pox on both houses pose.

          1. If that is true, then why should anyone care who wins?

            I meant to quote you…I don’t know if you think I wrote that or what…

            So when reading my above post the first line is quoting you then the rest is my opinion.

            If reason wants to pretend that who wins matters, they better start explaining how one is different that the other and drop the pox on both houses pose.

            You know as well as anyone that Reason is not legion. Hell every election they post up their votes and they have a diversity of opinion. I don’t know if Mathew is trying to be funny and fucked it up or if he is an idiot and fucked it up.

            His Romney Obama claims are wrong and incomplete…I do not think you can make a sweeping statment about Reason from them.

        2. Do you prefer to drive over the cliff at 100 mph, or 50? At least when you’re going 50, you have more time to try to get the goddamned brakes to work. I’ll get no real satisfaction from seeing Romney win, but I’ll derive tremendous pleasure from seeing Obama lose and watching his cheerleaders work themselves into a frothy rage of racism accusations.

  14. This whole post reads like something Megan McArdle would write.

    1. You know Mr and Mrs Suderman will do the right and proper thing and vote for Obama.

      1. Mr. Suderman votes how Mrs. Suderman tells him to vote. Until we meet Mrs. Suderman, Mr. Suderman’s vote is a mystery.

        1. If you ever read much of Mrs. Suderman, her vote is not a mystery. She will go for Obama.

          1. Shorter Mrs. Suderman:

            “I really don’t want to vote for Democrats, but Republicans are just so icky.”

            1. That’s the mark of someone who hasn’t fully converted to libertarianism.

  15. I for one am keeping a worried and keen eye on the wine and beer industries, which would suffer in a euro collapse despite the millions of Europeans who will turn to the bottle

    Really? Whats the assumption there?

    I’d think beer / wine exports would boom on an increasingly devalued Euro…

    And historically, booze businesses have tended to thrive in bad economies. When people start budgeting and cutting back on non-essentials… the allocation for booze often increases. its the ‘everyman’s luxury’… a vacation without leaving your home!

    A comment here on the resiliance of US booze during periods of high-unemployment =

    http://wallstcheatsheet.com/st…..ving.html/

    … and here’s how Diageo has done since the EU started to nosedive =

    http://www.google.com/finance?…..INXntsp=0

    I’d quote W.H. Auden if i could remember the line… but in ‘age of anxiety’ he has a whole running theme about the important role of booze when the world goes to shit.

  16. 5 Reasons Americans Should Care About the Euro Crisis

    How will caring help?

  17. Romney would almost certainly do nothing different in response to a euro collapse and he would still engage in his moronic trade war with China and his protectionist agenda.

    riiiight. because Obama is such a free trade advocate who wouldn’t, for example, bail out failing domestic auto companies to avoid their market share going to foreign-badged manufacturers.

  18. I’ll tell you why I care about a Euro crisis:

    Its an opportunity to make money.

  19. I kinda like this VW Golf R coupe

    I don’t think it is worth a penny over 24k otd though. A Euro collapse could really move some Wolfsburg iron.

  20. “The US will lose its largest trading partner”
    Uh no, we won’t. The individual nations and people that make up the eurozone aren’t going to up and die.

    “Romney will get elected”
    If, as you say, Romney’s not going to be any different, then who cares?

  21. Anyone else notice that the US will soon surpass the EU in GDP?

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