Get Used to Europe Fears

Europe fears are here to stay. The US economy is doing a lot better. We are making all kinds of progression. The problem is that the signs are hidden behind the headlines in Europe. The EU is the biggest problem in the world and will continue to be for years ahead. The market will continue to experience volatility until everyone realizes that their problems are far from over.

The EU seemed like a good idea at the time. It was good for consumers, companies, and travelers. However, it is terrible for economies. Consider the following: Germany and Greece are two very different countries with completely different policies. If Germany, one of the world's largest exporters, were to experience a strengthening economy, interest rates might need to be raised to suppress inflation and keep huge fluctuations in GDP in check. Greece might be struggling with economic growth and needs lower interest rates to help further stimulate the economy. The EU has a single interest rate for everyone. Inflation might run rampant in a good economy or a struggling economy may never see light at the end of the tunnel.

Currency is another issue. Let's say the EU is going strong but one of the countries is having problems. The euro was one of the strongest currencies a couple years ago. If the euro remains strong, a struggling country would continue to struggle as it would be more expensive for other countries to buy the struggling country's goods. Sales would remain suppressed.

Countries in the EU find it easy to trade with each other. Banks are a primary source. A lot of banks in Germany and France have participated in financial transactions with Greece. Now that the Greece government is on the edge of default, these banks are facing the catastrophe of receiving nothing. The EU is so intertwined that if one thing fails then they all will get hit hard. It is the financial crisis all over again.

Fears about Europe are rampant because of the fact that everything is connected. Having one policy for all those countries is nothing but a recipe for disaster. Growth will be limited in some countries while others will get completely left behind. If something terrible happens in one country, you can bet the house that a few other countries will also be affected. Europe and the EU does not get the cash money stamp of approval. One bad apple will ruin the whole barrel.