What If The EU Fails?

January 13, 2012   Filed under Germany

We are at a unique point in the history of modern civilization. A large chunk of the civilization, Europe, is collapsing before our very eyes. It could take the world economy down and nobody seems to really be paying much attention to it.

Many people are unaware the EU was actually an idea that arose following World War II. The idea was to create a unified economic power that would also make it less likely that certain countries in the union would attack each other.

The European Union may have seemed like a pretty good idea at the time. Well, it was. Unfortunately, the actual agreement fell far short of what needed to be done. Governments were only partially connected, which we are seeing now as a fatal flaw.

How do we know this? Well, let’s just consider Italy and Germany. Italy is corrupt and has massive debt problems. Germany abides to the rule of law, keeps its spending under control and generally has its house in order.

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.

The problem for the Europeans in keeping this together is there are now too many parties with too many agendas involved. Countries in serious debt don’t want to go the austerity route, but countries that will have to pay for this meth are demanding it.

Consider the United States and what it did in 2008 to save itself. The government passed the TARP act which was incredibly controversial and difficult to get through. The Federal Reserve the slammed seven trillion into the banks to avoid a depression.

Across the pond, we see a much more difficult situation. There is no strong central bank. On top of this, any change to the EU treaty requires that all 25 countries agree on the changes. What do you think the chances are of getting that done?

The real question now is how will the European Union break apart and what will it mean for the world? The top export market for the United States is Europe. When the EU dissolved, demand will drop like mad as well and the U.S. economy will stall.

Ah, but there is another problem. It is well known that the banks in the U.S. have big loans out to their brethren in the EU. If those banks start failing, our banks could go with them. It would be 2008 all over, but on steroids.

If you care about the future of America, you need to learn more about the problem with social security and out of control Medicare spending.

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