US Americans are guilty of being self absorbed fools believing the world revolves around us. Because of this we tend to ignore what chain reactions we cause elsewhere on the planet. The world is flat my peoples, and our problems in the states have caused ripples across the 7 seas.
The New York Times reported last week that Europe’s version of The Fed decided to raise their interest rates. While The Fed recently decided to hold its rate steady to fight recession, Europe is more concerned with inflation. The noteworthy aspect of this article has to do with the differences between Europe’s central bank and the US’s. Our economies are probably the most closely related. Many global business have offices on both continents, our imports and exports are heavily involved with eachother, and they are our political allies. For all intents and purposes Europe’s economy should mirror that of the US.
The rest of the modern world has been slashing rates or holding steady, but Europe is forced to raise them. I’m fond of referring to Europe as “the old country” because my Anglo-German ancestry. Since the end of the Industrial Revolution the old country has seen a steady decline in its dominance on the world stage. With Japan, China, India, and the United States emerging and financial strongholds I speculate we are witnessing the end of Europe as a global power. Of course this would take centuries but its the little acts that add up over time. The little act of differing from the US banking policy, a policy the rest of the world usually mirrors, is one such move.
Will we see massive economic decline? No. But I expect over the next 50 years companies in Europe will not be as profitable as they once were. Their high tax rates will keep new companies from moving to Europe. The companies that are still in Europe will likely move as the unions and guilds fall apart. I don’t have much money in the European markets. All of my international funds are weighted in more emerging markets.
This wasn’t mean to be investment advice. I’m wrong more often than I’m right. My point is Europe’s had a great run, but they’ve maxed out. Someday the US will too. Hit the read to get more details about the European’s rate increase and how it works over there. To learn more about how our Federal Reserve works please check out Weakon 180 in my Special Features section.
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
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