Would you invest in the Euro? Europe’s economic abyss draws near as violence in Paris is only a precursor of what’s to come – Op Ed
The horrific chain of events that once again blighted Paris last week serves to further remind the entire world that the future of Western Europe in its current state looks most certainly unsustainable. The question is, just how many more reminders to the populace are required before those who considered an open-border, single entity comprising […]
The horrific chain of events that once again blighted Paris last week serves to further remind the entire world that the future of Western Europe in its current state looks most certainly unsustainable.
The question is, just how many more reminders to the populace are required before those who considered an open-border, single entity comprising 26 completely non-aligned countries, with a common government and common currency to be a good idea, understand that this entire ideology is not only flawed, but heading for oblivion.
What is remarkable is that the Euro has retained its place as a sought after major currency thus far.
If all of the factors which are often leveled at Europe’s demographic and economic difficulties were placed into a spreadsheet, nothing would balance and it would appear inoperable for one month, let alone the 22 years that it has thus far existed.
Despite the United Kingdom having been one of the first nations to join the European Union, which in turn led to it almost giving away its sovereignty as a nation state, British lawmakers were sensible enough to retain the Pound, albeit in the face of massive pressure from left-leaning politicians to go into the single currency zone.
Demographic shift, financial instability, debt and de-industrialization – How has the Eurozone held up?
Taking a look back over the last 10 years, businesses in the Eurozone nations have not been able to keep pace with the sophistication and technological advancement of their New World counterparts. North America, Israel and the Asia Pacific region are leading the way with technological innovation, medical advancements, breakthrough startup ventures at the cutting edge of innovation, ultra-modern lifestyles and booming economies.
The US is completely over its sub-prime loan crisis because America is industrious, fiscally conservative and a nation which is run by the thought leaders of commercial enterprise rather than socialism and dependency.
In 2008, the majority of Britain’s banks went belly-up, requiring vast bail outs from the government, transferring the burden to already struggling taxpayers. London remains the largest financial center for institutional order flow in the world, however the majority of interbank flow is conducted by global banks based in the Square Mile, and is actually global order flow, mostly from outside of Europe.
Banking corporations in London such as HSBC and Standard Chartered are considering making the physical move to Asia which, lets face it, is where the real go-getters are. The banks have long focused on that region, however so inconsequential is the business in Europe that these fiscal giants may relocate to Hong Kong and use it as a springboard to China, or Singapore, a bastion of institutional solidity which serves all of Asia.
Europeans are jaded. The western side of the continent is burdened by vast national debt – France’s debt to GDP ratio is a staggering 250% compared to China’s 1%.
Whilst France’s economy, along with that of Germany, Belgium and Holland is eating itself from within, so is the fabric of the nation. The demographic shift which the European Union leaders have foist upon a non-self determining populace has led to central Paris having resembled a tinder box for the past year. I was in Paris in June this year for just one day, and was greeted by a racially-motivated ‘protest’ which waged its aggression through the once-elegant streets in close proximity to the Opera. This is a regular occurrence and as the European economy dives further, the will of an ever growing percentage of people with a will to destroy the nation from the inside grows at a rapid pace.
The Eurozone countries do not contribute greatly to the global modern financial markets economy, and with circumstances such as the Greek debt which exposed the European Central Bank to over a third of its entire capitalization whilst Greece still languishes as an agrarian nation which refuses to pay its debts, the flocking of migrants to Western Europe’s shores and a disenchanted domestic youth which regularly demonstrates how unwelcome capitalist enterprises are within Europe’s midst, it is a wonder that the Euro has been able to hold its position.
It is worthy of note that Brussels, home of the European Parliament, is also home to many Islamist groups whose very determined ideologies have about as much in common with Western free market economies and capitalist enterprise as thermonuclear fission does with cheese.
The two-fingered salute
Even though newly elected radical socialist Alexis Tsipras gave the European Commission a metaphorical two-fingered salute by announcing, much to the delight of the electorate in Greece, that he had no intention of paying back the debts that had been incurred by Greece, and indeed the country defaulted on its payment and remained defiant.
“The only way to build for a prosperous future is to be futuristic. This involves stimulating the entrepreneurial minds, encouraging tech startups, especially making an effort to be part of the current wave of fintech firms, and go global with smart financing from experienced VCs, and not to get bogged down in overtly-political and disastrous social and political programs which come home to roost with equally disastrous and irreversible endings. The EU is so intent on digging its own very deep grave that it is astonishing that the Euro keeps its 1.07 value against the Dollar” – Andrew Saks-McLeod
During the past few months, the Euro has gone down to almost parity with the Dollar, and there was much media furore and speculation to accompany that move.
Even when pre-existing conditions such as the increasing demographic difficulties, public spending, high unemployment levels, the size of the national debts and the lack of modernity which blight many EU nations, violence such as the events which took place in Paris last week, and is only the tip of a very large iceberg, is a factor which also creates economic havoc.
Tourism is affected, business with global offices may seek relocation, wealthy investors and high net worth business owners concerned for their own security will seek to leave the country, and infrastructure will become unprofitable due to people deciding to go elsewhere. I am sure, for example, that people taking flights from one non-EU nation to another will now look at paying a bit extra for a direct flight rather than passing through Holland, Belgium, France or Germany and then catching a connecting flight.
Bearing in mind that many airlines operate with such a narrow margin that they often require government intervention to continue operations, an impact of just a few weeks with less customers is enough to harm the economy.
Rather than address the problems and investing in a more sustainable future, European leaders have added fuel to the fire by extending public spending and bailing out failed states, not establishing modern industry, not reforming the banks – just last year alone, over $6 billion was paid by a collection of London-based banks for manipulation of FX benchmarks, and the annual reports of many large banks in Europe make for very telling reading as revenues in many cases have declined.
Switzerland, a nation which can be credited with absolute financial prudence, dropped its peg against the Euro in January, sending the markets into tumultuous volatility and finishing off some FX companies for good. Switzerland’s policy is to safeguard itself because Switzerland sells security, therefore this should have been a good indicator as to the overall sentiment.
Meanwhile Japanese traders fared well because very few Japanese retail FX traders trade the Euro, instead preferring USDJPY. The Japanese traders which made significant returns, and those who traded very high volumes during late January made hay while the sun rose over Japan by trading the CHF post-black Thursday, whilst many European traders caught a cold.
There is a very large elephant in a very small room in Europe yet the Euro remains at steady values. Will this continue? Very unlikely. Perhaps a better conundrum to consider is whether the European Union will exist in the near future, and if the Euro will be put out to pasture once and for all. What replaces the currency and the nation state may be far less reliable.