AnuragSahu-FT13411-S4-According to me, US is not benefiting much from the EURO crisis. As right now, China is the major competitor of USA as well as the major exporter of manufactured goods also. European countries buy far less dollars by investing in US government securities then China do. As a result, it is still the largest holder of US dollar in the world. Euro crisis is still prevailing and countries like Greece,Spain are waiting for Germany to pass a bailout package. If Euro falls then dollar would rise, which would directly impact the exports from US to other countries. In fact the progress of USA is highly dependent on the well being of Europe. If the European nations are in trouble, which together are the largest trade partners of USA, then it would directly impact the employments and businesses in the USA.
There are several implications of Euro Crisis on the U.S. Economy. First of all there is a direct exposure of financial sector. This makes the risk of the banks and other financial systems of United States that have branches in Europe to soar. This further increases the cost of capital. Further, if Greece exits or Eurozone fumbles more there will be more serious repercussions in the U.S.
US is no where benefiting from the crisis in that the very basic fundamentals of the market seems to be still in very weak state in US and also in Europe. The effect of Euro crisis has just escalated the problem and since global markets follow US markets, we see more effect visible due to Euro crisis rather than inbound problems of weak dollar and excesses government spending in US. So if one economy fails, there is no way other economy which is so dependent on other is not going be affected by it.
Euro crisis, if I have to take a call, is probably over. Although I am deviating a little from the topic, still I would like to link it with US. Previously, to save the Eurozone, ECB used to buy bonds of the weak nations to get the bond yields down so that they could get lending from the markets. However, this strategy didnt prove very effective; as soon as bond buying stopped, the yields spiked up again pushing the countries into risk of default. However, this time round the strategy is different from ECB. They have not bought any bond, but they have promised to buy unlimited amounts of bonds if the need arises. Its like bringing in the confidence of the people by doing something continuously, and you build so much confidence that even without action you can make people believe that you will do it.
Effect: Already the bond yields of Italian 3 years have come down from 6% to 2.5%, hence Italy is able to get loans at very low rates again.
Also, US has come up with QE3 which implies it will buy MBS of 40bn$ every month till the time economy recovers. Also, US have technically reduced its exposure to the European banking system, hence eliminating the structural risk to Euro crisis. Hence, US is not getting hurt directly from Euro crisis, neither is it benefiting. It would have benefited if Eurozone and US both were competing exporters; the decline of one would have benefited other.
As far as political equation is concerned, US would benefit is Eurozone as a fiscal entity collapses, and US political influence on the world would go up; but the current scenario doesn't warrant such an outcome.
Anurag Sahu_FT13411_S4-i still think that euro crisis is affecting USA negatively. Due to high unemployment rates in europe, most of the europeans are unsure about their future economic stability. As a result they have put a hold on spending and buying items such as cars and electronic appliances. The stock markets on both european nations and usa have fallen down. American giants like General Motors, Ford, Apple and Whirlpool have reported reduction in sales and revenue from european countries. May be ECB is thinking about some steps but looking at them, it seems like they are just postponing the eventual fall of some european nations and not dealing with the basic problem. Also it is not so easy to gain back the confidence of people/consumers after such a huge impact on all the neighbouring countries in the continent. The basic problem lies in the EURO currency. USA/Britain can generate their currencies like dollar/pounds to pay the bills but countries like Italy, Spain cannot do that. They are unable to borrow money from the market in Euros due to limit imposed by ECB. These countries are paying very high prices on their own economy by trying to stay in Eurozone
I don't think that U S is benefiting from Euro crisis •The U.S. is tied into the global economy through interest rates, through trade, through exchange rates, through credit spreads, through bank borrowing costs, and so if Europe spirals downward, it will certainly impact the U.S. •The unraveling of the euro zone would have a serious indirect impact on the U.S. financial system by re-pricing risk upward while pushing stocks down. *credit spreads and the cost of borrowing tends to rise because of general risk. Also, stock prices fall, and our ability to export also reduces; which is a negative for the economy when Europe is under crisis. •Branches of U.S. banks hold various securities against Europe and U.S. banks are global and have operations in many of the European countries. So, the U.S. automatically gets affected by the Euro crisis. •The cost of the capital of the banks would go up, spreads would go up--and as credit spreads rise, the assets on banks balance sheets would lose value, even if not directly tied to Europe. So clearly it would have serious repercussions in the U.S.--over and above any direct exposure. There is only one benefit that the U.S. is getting from this. •The growth in manufacturing sector which could help keep gross domestic product from plummeting to the recession levels being seen in Europe. •U.S. companies are less dependent on trade for GDP growth, so the European crisis isn't as vital to American expansion. Earnings for large companies were there even in the first quarter.
As I mentioned, various US behemoths are facing loss of revenues and sales due to crisis in european countries. Obviously, if the situation gets better, as hinted by the statements made by ECB, US would be benefitted..
AnuragSahu-FT13411-S4-According to me, US is not benefiting much from the EURO crisis. As right now, China is the major competitor of USA as well as the major exporter of manufactured goods also. European countries buy far less dollars by investing in US government securities then China do. As a result, it is still the largest holder of US dollar in the world. Euro crisis is still prevailing and countries like Greece,Spain are waiting for Germany to pass a bailout package. If Euro falls then dollar would rise, which would directly impact the exports from US to other countries. In fact the progress of USA is highly dependent on the well being of Europe. If the European nations are in trouble, which together are the largest trade partners of USA, then it would directly impact the employments and businesses in the USA.
ReplyDeleteThere are several implications of Euro Crisis on the U.S. Economy. First of all there is a direct exposure of financial sector. This makes the risk of the banks and other financial systems of United States that have branches in Europe to soar. This further increases the cost of capital.
ReplyDeleteFurther, if Greece exits or Eurozone fumbles more there will be more serious repercussions in the U.S.
US is no where benefiting from the crisis in that the very basic fundamentals of the market seems to be still in very weak state in US and also in Europe. The effect of Euro crisis has just escalated the problem and since global markets follow US markets, we see more effect visible due to Euro crisis rather than inbound problems of weak dollar and excesses government spending in US. So if one economy fails, there is no way other economy which is so dependent on other is not going be affected by it.
ReplyDeleteManish FT13439 Section S4
Euro crisis, if I have to take a call, is probably over. Although I am deviating a little from the topic, still I would like to link it with US.
ReplyDeletePreviously, to save the Eurozone, ECB used to buy bonds of the weak nations to get the bond yields down so that they could get lending from the markets. However, this strategy didnt prove very effective; as soon as bond buying stopped, the yields spiked up again pushing the countries into risk of default.
However, this time round the strategy is different from ECB. They have not bought any bond, but they have promised to buy unlimited amounts of bonds if the need arises. Its like bringing in the confidence of the people by doing something continuously, and you build so much confidence that even without action you can make people believe that you will do it.
Effect: Already the bond yields of Italian 3 years have come down from 6% to 2.5%, hence Italy is able to get loans at very low rates again.
Also, US has come up with QE3 which implies it will buy MBS of 40bn$ every month till the time economy recovers. Also, US have technically reduced its exposure to the European banking system, hence eliminating the structural risk to Euro crisis. Hence, US is not getting hurt directly from Euro crisis, neither is it benefiting. It would have benefited if Eurozone and US both were competing exporters; the decline of one would have benefited other.
As far as political equation is concerned, US would benefit is Eurozone as a fiscal entity collapses, and US political influence on the world would go up; but the current scenario doesn't warrant such an outcome.
Pratik Ghosh- FT13356
Anurag Sahu_FT13411_S4-i still think that euro crisis is affecting USA negatively. Due to high unemployment rates in europe, most of the europeans are unsure about their future economic stability. As a result they have put a hold on spending and buying items such as cars and electronic appliances. The stock markets on both european nations and usa have fallen down. American giants like General Motors, Ford, Apple and Whirlpool have reported reduction in sales and revenue from european countries. May be ECB is thinking about some steps but looking at them, it seems like they are just postponing the eventual fall of some european nations and not dealing with the basic problem. Also it is not so easy to gain back the confidence of people/consumers after such a huge impact on all the neighbouring countries in the continent. The basic problem lies in the EURO currency. USA/Britain can generate their currencies like dollar/pounds to pay the bills but countries like Italy, Spain cannot do that. They are unable to borrow money from the market in Euros due to limit imposed by ECB. These countries are paying very high prices on their own economy by trying to stay in Eurozone
DeleteI don't think that U S is benefiting from Euro crisis
ReplyDelete•The U.S. is tied into the global economy through interest rates, through trade, through exchange rates, through credit spreads, through bank borrowing costs, and so if Europe spirals downward, it will certainly impact the U.S.
•The unraveling of the euro zone would have a serious indirect impact on the U.S. financial system by re-pricing risk upward while pushing stocks down.
*credit spreads and the cost of borrowing tends to rise because of general risk. Also, stock prices fall, and our ability to export also reduces; which is a negative for the economy when Europe is under crisis.
•Branches of U.S. banks hold various securities against Europe and U.S. banks are global and have operations in many of the European countries. So, the U.S. automatically gets affected by the Euro crisis.
•The cost of the capital of the banks would go up, spreads would go up--and as credit spreads rise, the assets on banks balance sheets would lose value, even if not directly tied to Europe. So clearly it would have serious repercussions in the U.S.--over and above any direct exposure.
There is only one benefit that the U.S. is getting from this.
•The growth in manufacturing sector which could help keep gross domestic product from plummeting to the recession levels being seen in Europe.
•U.S. companies are less dependent on trade for GDP growth, so the European crisis isn't as vital to American expansion. Earnings for large companies were there even in the first quarter.
Nicely Put
DeleteI think here we are leaving an important impact point of Euro Zone on U.S. business confidence and U.S. household wealth.
ReplyDeleteAs I mentioned, various US behemoths are facing loss of revenues and sales due to crisis in european countries. Obviously, if the situation gets better, as hinted by the statements made by ECB, US would be benefitted..
DeleteSo, we see a high correlation.
DeleteSome videos on the same:
http://video.cnbc.com/gallery/?video=3000093109
http://video.cnbc.com/gallery/?video=3000096317
Winner is Anurag Sahu.
ReplyDelete- Shanthi sk.