European Contagion

There is quite a lot in the news about the Euro crisis. I’m skeptical of claims that a Euro implosion would be disastrous for the U.S. economy. First off, Greece being ejected from the Euro doesn’t mean the end of the Euro. Just that Greece was brought in with an overvalued currency and with the full knowledge that the books were cooked. The U.K. was ejected from the Euro’s predecessor 20 years ago. That event propelled a dramatic economic recovery from disastrous interventions to stabilize its currency. It’s also the primary reason Labor was in government from 1997 to 2011. Even with larger knock on effects, the Euro zone is not a significant growth market for U.S. exports and an economic slow down might have a knock-on effect for materials prices. The U.S. performance this year tracked fairly well with oil. I’m likely wrong about this, but I don’t see this as our greatest challenge.

The most interesting piece that I read was a graphic in today’s Post illustrating U.S. exports to Europe. As I expected, exports to the southern tier countries aren’t that great. I expected the bigger EU countries (U.K., France, Germany) to make up the lion’s share. The shocker to me is that the largest market for us is Benelux (Belgium, Netherlands, Luxembourg), accounting for roughly $55B of U.S. exports per year, well ahead of the U.K. at $42B. One might quibble with me combining the three countries, but our Benelux exports rival those to Germany and France combined ($58B). For the record, here’s the top 10.

Country Imports Exports
Canada $237B $210B
Mexico $196B $146B
China $292B $74B
Japan $92B $49B
United Kingdom $38B $42B
Germany $72B $36B
Korea, South $43B $33B
Netherlands $18B $32B
Brazil $22B $32B
Hong Kong $3B $27B

Incidentally, there is only one country that shows zero imports or exports to the U.S.–Yemen. Unless you included postal bombs.

BB

7 Responses

  1. Wow, China really drives those numbers in the trade deficit don't they? We do a small amount of imports and exports. Our exports outweigh our imports but the only country we import from is China (Taiwan). We used to have several products manufactured over there but we're down to one company now, the rest ended up stealing our tooling or disappearing off the face of the map.

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  2. In many ways this points up ho much more important the US-CA relationship is than any other we have.

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  3. OT: Watching Daily Show. Herman Cain quoted the Pokemon 2000 movie (closing credits song) in his announcement that he was suspending his campaign, with attribution. Gotta say, Herman Cain was awesome. Wish he didn't have quite so many skeletal remains in his closet (some of them actually currently alive, thus making them, I suppose, more like zombies in the closet).

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  4. Ah, that's it. Instead of Cain, they were saying Brain(s). I noted the China number, but we really should lump Hong Kong in with it. That still makes it $295B coming in, $101B going out.BB

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  5. Ah but part of this is that we don't know what we don't know. According to the last report from the Bank of International Settlements, US financial institutions had written at least 500 billion worth of CDS on Europe. So depending on who they wrote that insurance on, we could very easily have another banking crisis.

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  6. john:So depending on who they wrote that insurance on, we could very easily have another banking crisis.Also depends on who they wrote that insurance to.

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  7. scott:Yes, like AIG, we'll never know unless/until it blows up in our face.

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