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Elizabeth White / US Economy - Eurozone "Reduction"
 
Name: United States
Description: United States
Author: Elizabeth White
 
Economic Analysis  
 
1. Importance Very important   While Europe represents 18% of the exports of the US, which is about $400B annually, it's strategic importance is even greater. It is the largest export for China, and it's involvement with US banks is huge. Thus, it is very important to consider Europe's economic future when evaluating investments in the US.
2. Wisdom Important   The US economy is intimately linked with the success or failure of the European economy. As Europe goes, so goes America.
3. Knowledge Important   If "Reduction" is the path the the European Union countries choose, and implement it in a timely manner, then some of the economies of the world will improve, including the US, and some will not.
4. Current Assessment Fair   The sovereign debt crisis in Europe threatens the economies of the world.

The US, having the largest economy in the world, is especially vulnerable.

Most economies are fragile. The fragility has been caused by excessive debt. The US is in a precarious position, and can ill-afford to suffer another deep recession.

Governments and corporations are currently evaluating the impact of certain scenarios should the European sovereign debt crisis get worse or remain unresolved.

Investors need to consider these scenarios in their planning, whether they are 25, 45, 65 or 85 years old.

Most agree that the current deleveraging that is rippling through economies, industries, companies and households will take 10 years to complete. The crisis started in 2007, and thus it will be 2018 before the world has completed the deleveraging cycle.

The three possible scenarios are:

  • Centralization
  • Disintegration
  • Reduction

    This model focuses on Reduction and its impact on the US economy and securities.

    • 5. Future Assessment Fair   "Reduction" is the scenario where the weak countries of the 17 that currently share the euro single currency abandon the euro and use their own currency and conduct their own fiscal activities. Countries such as Greece, Ireland, Spain and Portugal may actually revert to their own currencies in this scenario.

    And yet, the euro and the European Union would still survive, perhaps in a stronger position due to the exit of weaker economies. In this scenario, the US GDP would likely exceed 2% per year for a number of years, and perhaps be above 3% consistently, which is the sign of a stable, growing economy.

     
     
    Future Assessment Probabilities, Reasons and Explanations
     
       Possible Outcome Probability Value Reasons and Explanations
    1. Awesome   0% > 8%
    2. Good   20% > 4%
    3. Fair   60% > 2% Reduction would save the euro as a single currency of the strongest economies in Europe. The weaker economies would abandon the euro and revert to their native currency.
    4. Bad   10% > 0%
    5. Terrible   0% < 0%
     
     
    Key Performance Indicators


    Key Performance Indicator Importance   Current Assessment   Future Assessment  
    1. Consumer Durable Goods   Very important   Fair   Fair
    2. Economic Cycle   Very important   Fair   Fair
    3. Gross Domestic Product (GDP)   Very important   Fair   Fair
    4. Interest Rates   Very important   Good   Good
    5. Inflation Rate   Important   Good   Good
    6. LIRA - Leading Indicator of Remodeling Activity   Important   Bad   Bad
    7. Personal Income   Important   Fair   Fair
    8. Saving and Investment   Important   Fair   Fair
    9. Total Economy - Current Account   Important   Bad   Bad
    10. Unemployment   Important   Bad   Bad
     
     
    Linked Entities


    Industry Importance   Current Assessment   Future Assessment  
    1. Consumer Services   Important   Fair   Fair
    2. Finance   Important   Fair   Good
    3. Technology   Important   Fair   Good
    4. Consumer Durables   Important   Fair   Fair
    5. Public Utilities   Important   Fair   Fair
    6. Basic Industries   Important   Fair   Fair
    7. Energy   Important   Fair   Good
    8. Capital Goods   Important   Fair   Fair
    9. Health Care   Important   Fair   Fair
    10. Consumer Non-Durables   Important   Fair   Fair
    11. Transportation   Important   Fair   Fair
    12. Funds   Important   Fair   Fair
    13. Miscellaneous   Important   Fair   Fair
     
     
    Portfolios
     
    Morgan Stanley - Cloud Computing - Best Positioned US Companies details | stock charts
     
    Associated Information
     
     
    Countdown is on to save Euro - CNBC - December 6, 2011
     
     
     
    Euro Crisis - How we got here - CNN - Tue December 6, 2011
     
     
     
    Brussels summit rejects EU-wide treaty change - 9 Dec 2011 - posted by Al Jazeera (English)
     
     
     
    EU Summit Repercussions - FRI 09 DEC 11 - CNBC.com
     
     
     
    Why investors still worry about Europe - CNN Money - December 12, 2011
     
     
     
     
    Hyperlinks to relevant information
     
    Radical eurozone shakeup could see Brussels get austerity powers - guardian.co.uk, Tuesday 6 December 2011
    European Union leaders have five days to solve debt crisis - The Guardian, Saturday 3 December 2011
    Eurozone warned of credit downgrades after Germany and France strike deal - The Guardian, Monday 5 December 2011
    EU treaty reform: what does it mean? - guardian.co.uk, Monday 5 December 2011
    European public debt at a glance - CNN - July 21, 2011
    Latest EU Deal Still More Can-Kicking: Analysts - Friday, 9 Dec 2011 - CNBC.com
    European Union summit agreement: the main points - guardian.co.uk, Friday 9 December 2011
    Stocks tumble on European worries, Intel warning - CNN Money - 12 Dec 2011

     


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