Should the Euro collapse, Europe will find itself at the epicenter of a massive economic earthquake ... one that will shake the markets in virtually every nation on the planet. And no wonder, we're talking about the failure of the world's second-largest currency. Of course, not every currency will fall in value. That would be impossible, because currencies rise and fall in relation to one another. Which is why, with currencies, there's always a way to make money somewhere.
So, should the Euro collapse, how will things play out?
A Euro collapse will initially be bad for China. And that's regardless of whether they continue helping to bail out Europe (questionably currently). While China may have experienced massive economic growth over the past decade, it has also become highly dependent on consumer demand from Euro zone nations. So the initial shakeup will only add to China's already stressed and slowing economy.
Meanwhile, many investors seeking shelter from the Euro's collapse will turn to one of the few safe havens they can find: U.S. Treasuries. However, these investors must first buy U.S. dollars to buy U.S. Treasuries, which of course would mean that, at least initially, they would drive up the price of the dollar.
However, expect these roles to eventually reverse themselves. Because as things play out, China will rebound while the United States stumbles. You see, the financial market impact feeds negatively into the real economy. So despite the initial boost, the surge to U.S. Treasuries will end up hitting U.S. demand hard ... and hitting China's growth.
What about some other currencies?
The collapse of the Euro will trigger a deadly domino effect that is likely to send currency after currency tumbling down. Several will dramatically plummet in value as a result of the European banking crisis. The currencies of emerging markets will be particularly hard hit. These nations typically don't have a capital market to issue bonds, and the Euro zone is their main source of credit and loans.
Would you like to share some of your ideas regarding a Euro collapse?
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