Are We Importing Europe’s Economic Woes?James Cordelaine
When Americans think about setbacks in the European economy, we like to believe they can’t happen here. While we have the integrity to be self-critical as a nation, we’re still too proud and successful to imagine Europe’s economic problems ever becoming our own.
Will we see negative interest rates on bank accounts? No, they can’t take hold here, or so we tell ourselves. Nor will we get hit with sovereign bond yields that slide below zero like those in Germany, Denmark, Austria and Switzerland. These are Europe’s wacky bond problems, not ours. And as for the European Central Bank (ECB) and its implementation of quantitative easing? Our Fed’s been there, done that. We won’t make that mistake again.
Think again! At least in economic affairs, what happens in the European Union doesn’t stay in the European Union. In just 2012, for instance, trade between the United States and the Eurozone amounted to six hundred and fifty billion dollars. Our investment in Europe is three times that of all Asian countries combined.
The bad news is we run a trade deficit year after year with the EU. This suggests we may be more economically dependent on them than we want to be. The economy of the EU is now very bleak. ECB President Mario Draghi recently implemented additional quantitative easing that will likely come to nothing, as has happened with similar recent measures, leaving European businesses twisting in the wind.
The German Newspaper, Handelsblatt, has reacted harshly, albeit humorously to the initiative by posting a picture of him lighting his cigar with increasingly worthless paper euros.
The upshot for the U.S. is, if European businesses keep failing to use QE as an investment springboard, the European Union will buy fewer goods from the United States. Since we already run a continuing negative trade balance with them, that’s how we end up on the short end of Europe’s slowed economy.
Even if the U.S. launches a renewed initiative to relocate American manufacturing facilities from Europe to the United States, we won’t be in a position to declare our economic independence from Europe – at least not right away. Economic changes take time. Like it or not, the EU is our trading partner, and Europe and the U.S. inhabit one world.
While we can do little to change the global scope of our economy, we can do our best to safeguard our own personal finances—but we have to make it priority immediately. A key strategy to accomplish this is to invest an increasing percentage of our savings in gold. Gold is nobody’s liability. It’s a tangible asset that won’t shift in value with the balance of trade. It’s unaffected by quantitative easing or other desperate economic measures. And no one can use your gold to light their cigar.
Why not set aside a certain amount of money each month to invest in the yellow metal? Use some of the cash you set aside for stock purchases, or some of the money you’ve saved through lower gas prices at the pump.
Yes, we’ll inevitably import some of Europe’s economic symptoms of a flat economy. But this is America. We’re strong and we’ll manage to see our way through the difficulty. For this reason, it ultimately makes more sense for you to be less concerned about your country’s economic independence right now, and more concerned about your own.