One thing that drives me nuts is when people look at an argument in a simple light and don’t really examine all the details.
For example, how many calls have we had for the euro’s demise ever since the Greek crisis began and spread to the PIIGS nations?
People have to understand that there are major reasons the euro is in existence: One reason is that it could prevent countries from devaluing their currency.
Whenever countries like Spain or Italy run into trouble, they could devalue their currencies and then their exports would be more competitive with Germany.
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However, with the euro, this couldn’t happen and you have a constant trading mechanism. If you look at Germany’s trade surplus with Europe, you can see it has really worked. Germany has a huge trade surplus with most of the rest of the European countries.
Therefore, if you think this is going to disappear in the first traces of a debt crisis, you are mistaken.
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In addition, we have the Chinese. George Soros, in a recent interview, made an excellent point that every time things look dicey in Europe and that the euro is about to tank, a mysterious buyer emerges. This buyer possibly is China, which has expressed its displeasure with the United States.
I personally think the Chinese are making a shift to Europe. Europe is just as large an economy and unlike the Americans, the Europeans have accepted austerity to slash deficits. This means less money-printing in the long term.
I think the Chinese are more comfortable with the Europeans. In addition, there isn’t as much pressure from the European community for the Chinese to devalue as the euro has been much stronger than the dollar over the past 10 years.
While many continue to call for the demise of the euro, I think just the opposite. I think in three to five years, you will find a much stronger currency than the dollar.
About the Author: David Skarica
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