us$ crash, page-11

Yet again, all the old chestnuts seem to be coming out of the clover.

Some points of comparison:
1.
RELATIVE SIZE
US economy accounts for ~30% of global economic activity. The Eurozone accounts for <20%.
2.
INTEGRATED STABILITY
The US economy is a single integrated economic state. The EU /Eurozone is a group of countries (often with conflicting internal ideologies, degrees of nationalism, economic status and appetite for reform, and structural diversity. Now, if the Euro included the GBP and political integration fully occurred, then the argument might be somewhat different.
3.
DEFICITS
The US suffers from twin deficits - granted. Most EU countries (particularly within the Eurozone) suffer from significant fiscal deficits. The Maastricht Treaty required deficit ceilings of 3% (max) of GDP. Most Eurozone countries are now in breach of this ceiling. In Greece's case, they have been caught out by inventive accounting /fiscal lying. In Germany's case, they have siphoned off a lot of State-owned debt so that it can be excluded from the deficit calculations.
4.
REFORM
US reforms have been reflected in the ongoing productivity boom. There is, however, more to come, including the application of next year's Job Creation Act. In contrast, much of the EU/EZONE continues to suffer from a lack of pension reform, labour market reform, export reform, fiscal discipline, political and defence reform, and social reform. Subsidies have continued (particularly in the agricultural arena) but have been dressed up in different ways to avoid prominence.
5.
US JOB CREATION ACT
Anyone doubting the potential impact of this piece of legislation on the repatriation of US foreign profits during 2005 would be well advised to read the article on page 42 of today's The Australian. An estimated US$300-500 Billion in profits could well be repatriated backc to the US next year, including a rather significant amount from Australia - particularly during the 2nd quarter.
6.
GROWTH
By any standard of measure, US economic growth remains >2x (almost 2.5x) that of EU growth.
7.
POPULATION
US population growth is increasing (due to high immigration intake and a rise in natural growth rates particularly amongst the Latino minorities). A similar reversal to that recently seen in Australia is also seeing an increasing birth rate amongst women aged 30+ in the US. In contrast, EU growth is falling, and populations in countries such as Italy and Germany are expected to fall significantly over the next 5-20 years. Conversely, French, Spanish and UK growth is likely to be flat.

So, whilst the US has its problems, the EU/EZONE also has its fair share of problems, a number of which are being conveniently ignored in the shsort-term.