The Difference Between The EU and US That Dooms The EU
The news out of Europe lately has been rather shocking. The Euro Zone is falling apart and it could potentially take most of Europe if not the world with it. Despite this, people seem to be failing to understand the significance of the impact.
Most observers think the Euro Zone is a modern idea. Actually, it came about after the defeat of Hitler and Nazi Germany as people tried to figure out how to prevent a third war. By tying the countries together economically, many thought this would be achieved.
All and all, it is hard to criticize an idea designed to prevent future wars. That being said, the countries fell short in their actual agreement by failing to nail down specific economic requirements. This failure is now leading to the end of the idea.
To see this problem in action, consider Italy and Germany. Italy is beyond corrupt, runs huge deficits and is a complete fiscal disaster. Germany pursues conservative economic philosophies and keeps its debt low in contrast.
What do we see today? Italy is on the edge of default and needs trillions to stay afloat. Who has to pay for it? Germany. As you can imagine, this concept is not very popular in German in either a practical or political perspective.
Ultimately, one has to think the noble idea is going to fail and soon. All the old bitterness is rising again and there are now too many political factions involved. Not only do leaders have to negotiate a resolution, but they have to somehow sell it at home.
To understand the problem, look back a few years across the pond. The U.S. passed TARP to save itself and that was nearly impossible to do. That was just one Congress. On top of that, we now know Ben Bernanke had to pump 7 trillion dollars into the economy.
Now consider the situation in Europe. Instead of one Congress, you have to get the legislative bodies of 25 different countries to agree to a plan. The chances of that happening are next to none if you are being realistic.
At this point, you might be wondering why all of this matters given we have already dealt with our own crisis. Well, globalization means you need to care. The problem is Europe is our biggest export market. If demand dies there, so does our recovery.
Then there are the banks. The banks of the United States and Europe are intertwined. Many worry that failed banks in Europe would bring down the banks in the United States as well. If that happened, we could be looking at a world wide depression. That should keep you up at night.
If you care about the future of the U.S., you need to learn more about the problem with social security and other forms of government spending.
