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It is really the largest monetary union in the earth.

When it had been formed, every person thought it would not keep going. A lot rooted to it to fail outright.

But after that a little strange occurred.

This union defied the chances. It cleaned up its messes. Union leaders stopped people from exit, then performed referee since member states argued on how to handle their economies.

Ultimately, this union made the leading financial system and political body of the world. Investors not just respected this union — they rapidly planned to hold this union's currency.

…Well, until recently.

I am regretful to remark, this union is starting to fall down. At the present every member state is in further panic than the previous. We are watching budget deficits, protests in the street, and debt-infested governments that every one should try to decrease expenditure but never do.

Also now many people are snickering on the sidelines saying that this crisis will collapse the currency…

The 'Crisis' Story that No One Is Revealing

Think I am talking regarding the EU, right?

Well I am not … I am talking on the topic of the U.S.~

That is right — the U.S. is certainly a monetary union same as the EU. Many of us share the same currency, same government in addition to that we could travel across state borders without taxation, a passport or changing currencies.

Lately, everybody of their brother is beating up the EU. However the real reality is, the EU's debt problems are small when compared with our debt troubles in the United States.

The U.S. is the real risk economy (along with currency), however it  allows the easiest method to safeguard yourself in the near future.

Before we get down to business, permit me present you with my thought on this so-called euro crisis.

Euro Downfall? Give Me a Break

Long ago, before there was a euro the European Union members decided to Maastricht Treaty. This agreement would govern the member nations, so ultimately they may create a single plan meets all for the whole EU.

Amongst other things, the Maastricht Treaty mandated that all associate state could have only a budget deficit of three% of its GDP. To become a member the EU, every member should meet that limit.

A large amount members decided to fulfill the objective via selling their gold, that they did in 1998 and 1999. But they made it. As soon as the Union shaped, thirteen nations united together under the Maastricht Treaty.

At present, seventeen nations are EU members, and each and every one those citizens use the euro as their currency.

Unluckily, one of those members used voodoo economics to satisfy the budget deficit rule. Basically, they cooked the books to make it appear as if they only had a 3% budget shortfall.

Right now the facts are finally coming out, years later entering the EU.

That country? I am sure it is possible to assume. It is actually Greece.

Is that this shocking? Incorrect? Definitely.

But it is also the main reason why experts everywhere in the globe are talking regarding the approaching collapse of the euro.

At this moment I can agree that this will certainly be a slow down for euro. But come on. The euro will NOT collapse simply because of 1 rotten apple. It does not make sense.

Greece's whole contribution to the whole Eurozone GDP is merely 2%. If yo happen to take out 2% of the whole Eurozone's GDP, do you actually consider the EU will fall down?

That is like saying the U.S. GDP would downfall if Idaho left. Not likely to go down~

To consider this further, everybody calls EU's worried states the PIIGS (Portugal, Italy, Ireland, Greece and Spain). However once more, the PIIGS only account for 14% of the entire Eurozone GDP.

Believe the PIIGS Are Harmful? Hear This

Numerous U.S. states are already in default because of several reasons.

A few cannot make payments to state schools. Some are in the red on their retirement fund payments. Some are not paying out their insurance premiums. A few are issuing IOUs on tax returns along with other payments, however they cannot pay back without more debt.

The list of tired states contains the great states of California, Michigan, New York, Massachusetts and also Obama's territory, Illinois.

Count up the majority of these states' debt and the hit to U.S. total GDP is over 30%~

(Remember I said the PIIGS' debt was merely 14%?)

Here is the major difference…

Greece, or Spain, or whichever belonging to the PIIGS might fall out of the EU at any moment … or else EU leaders could force them to go away.

California, Illinois, and others cannot go away the U.S. — moreover Uncle Sam cannot kick them away also~

Therefore the United states. is saddled by these defaulted states' deficits, whereas the Eurozone could well say, good removal to the PIIGS, and move next to as a more powerful unit~

Simply for example, let us shed the light on the happenings in Illinois…

The position is in utter problem, said Rep. Suzie Bassi (R-Ill.). We're next to bankruptcy. We've got a $13 billion hole in the $28 billion budget.

The state have been repaying payments with unfunded vouchers from October. One fifith of buses have stopped. Libraries, to be paid $400 million, are closing one day a week. Schools are owed $725 million. Not capable to pay for instructors, they're preparing bulk lay-offs. 'It's a catastrophe,' said the Schools Superintendent.

Once more, the dire nature with the U.S. states is much larger than the Eurozone members.

Chicken Littles Cry In relation to Euro's Impending Demise (Again~)

Yes, these EU member states was completely from line if they continued deficit spending. It is only fair the euro suffered quite.

However, to mention of the fact that euro will fall down is just difficult.

Before the euro even became an definite unit in 1999, there have been those who didn't think it will survive, as well as would soon collapse. Still, the euro, which suffered in the beginning, finally came on strong.

In 2005, while Sweden and Denmark together rejected to enter the euro, pundits once more called for the euro to fall down. On the other hand the euro just came back more powerful. In 2008, in the financial fall down, they said the euro would drop apart. And again, the euro came back more powerful following selling off.

So is that this really one more circumstances of euro selling as a variety of Chicken Littles run around calling of the euro's downfall, simply to determine it rebound plus come back more powerful?

Or else is that this ultimately the hangman's noose for euro?

In my opinion, I think it to be the previous. Here is why…

The euro is the next most liquid currency on the earth, also the 2nd most generally traded currency in the world.

It is the offset currency for the dollar — as well as the close thing to the next world reserve currency.

Hence, if you suspect that the euro will collapse, so therefore you will need to think that the U.S. dollar will continue to soar for years. You should consider our deficit expenses that's gone on for over eight years now could be no big deal.

There are several traders who assume this way. I name them the deficits don't matter crowd.

This blatant disregard for the currency's debt every time reminds me of a person leaping off the Empire State building.

He passes the 56th level and screams… So far, so good~

The purpose is long-term deficits always matter. Greece found that out. It can be only a matter of time before the U.S. does.

We are not seeing the United States' deficits show up in dollar's price however. But it's setting out to head in that way.

When these deficits do reach home to roost, anybody having us dollars will figure out just damaging all that debt truly is~

Fairly talking, our problems are much bigger. However we still have to listen to the market plus relay what its saying.

For now, I think the markets will continue to concentrate on the debt problems in EU instead here in USA.

Traders are punishing the euro, so we'll observe some more euro weakness for a few months.

But, I do believe that should transform. Until it does, but, we must protect ourselves from euro failure.

It will likely be an actual drag above the improving U.S. economy, and also the U.S. dollar. But as soon as that happens, the euro will ensure some life again.

You will not be capable to say that you were not warned~

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Tags: Budget Deficit, EU, European Union members, Monetary Union