|The Europeans are Hell-bent on making|
a Dresden out of their economies.
The European Union and the Euro itself are close to collapse, which in most other scenarios would delight 'Puter. After all, it's a stunning real-world rejection of liberals' pet notion that a One World Government* would solve all our problems.
Global warming? Hand it over to the United Nations to enforce the Kyoto Protocols. Genocide? Hie thee to The Hague and plead your case before the International Criminal Court, of course. Human rights abuses? Surely Amnesty International** will solve all your problems. As we all know, thanks to our international government leaders, we no longer have to worry about pollution or genocide or human rights abuses. 'Puter's sure Cuba's political prisoners and China's lao gai "guests" will be thrilled to know their persecution is all in their heads.
You'd think Europe would have learned by now that uniting a continent divided by language, culture and history, except through a generous application of military power, is impossible. But no. Europe marches ever-onward, chasing the dragon, committed to implementing its unification pipe dream.
"So," you ask 'Puter, "aside from the wicked cool opium references, why should I care about anything you've just banged on about for the last four paragraphs?"
Here's why you should care. Europe is cracking up. The European Union is teetering on the brink, Europe's united currency is about to go tits up, and most of Southern Europe is on the verge of revolution. Other than that, Mrs. Lincoln, how was the play?
Here are the most likely ways a European sovereign default, followed by the failure of the European Union and the Euro, will affect your life:
1. European export markets dry up, giving America fewer places to sell its goods. Our manufacturing sector has just started its recovery. The last thing it needs is for one of our largest markets to vanish overnight. And that's what will happen with the political and financial instability created by Europe's failure to unwind its foolish and terrible entanglements in an orderly fashion.Even if you don't care about Europe, even if you think the Greeks/Spanish/Eye-talians/Portuguese/Irish are getting what they deserve, you should care about Europe's troubles.
2. European bank contagion ("Good to see you again, collateralized debt obligations, interest rate swaps and multi-layered hedges! Where've you been?") seeps across the Atlantic cratering American banks. If anyone tells you they know the full scope of American banks' exposure to European banks, they're lying. American banks themselves can't even figure out what they're holding. In short, think fewer loans, depressed stock prices and more failures.
3. Continued uncertainty in Europe means the United States' sovereign debt retains its role as the least unappealing turd in the punch bowl. This means our government essentially borrows for free, as foreigners and Americans seek a safe haven -- any safe haven -- from Europe's woes. The influx of "free" money permits Congress to keep spending like teenaged stoners using Daddy's credit card at 2:00 AM in the local SketchyMart.***
4. Continuing our "turd in the punchbowl" simile, the largest purchaser of United States bonds in 2011 was not a private party. It was not a foreign government. It was the Federal Reserve, which purchased about 60% of all debt issued. This is referred to in wonk-speak as monetizing the debt, or in layman's terms, printing money. When (not if, but when) investors find a better place to park their money, or if the economy ever turns around, inflation will run rampant, devaluing savings and pinching the average American.
You should care because if Europe doesn't get its act together in short order, Europe's troubles will be America's troubles.
*Were 'Puter being cruel, he'd bust out the "Ein Volk, Ein Rich, Ein Fuhrer" Nazi Germany reference, the last time mainland Europe was actually unified. Ironically, it's the Germans again leading the way to Europe's destruction.
**Motto: "50 years of ignoring human rights abuses in Leftist regimes." Alternate motto: "IZRAUL!11! ITZ TEH JOOOS FAWLT!!1!1!!one!!"
***For our simile-challenged readership's edification, this is not a favorable comparison.