A Euro Trip

I love visiting Europe. The continent has a rich past that any history buff such as myself would enjoy. Having visited France, Britain, Italy, Spain, and Monaco, I have seen quite a bit of the western portion of the continent, and I am quite fond of it.

However, Europe has been struggling financially, especially over the last few weeks. Last summer, when I went to Europe, 1 American dollar could purchase roughly .68 Euros. Today, 1 American dollar buys nearly .82 Euros.

In this chart, notice how much the dollar has improved against the Euro over the last five months.



Because of financial strife in Greece and overarching issues relating to the common currency of the EU, the Euro, it has certainly been a controversial and fiscally painful economic downturn in 2010.

"Europe's bailout plan for Greece may have calmed market fears about the future of the euro, but there is still uncertainty about the long-term outlook for the struggling currency.

While the euro zone isn't likely to ditch the 11-year old common currency anytime soon, many believe that the bailout hasn't solved the underlying problem of imbalances between European nations. And critics of the common currency used by 329 million people across 16 nations argue that the euro is a major cause of those imbalances."

I think there are several things that we can derive from this European crisis, but I want to focus on two today.

First, I believe that there are several powerful figures who would love to create a North American Union consisting of Mexico, Canada, and the United States. I would hope that this major currency problem in Europe would make those folks feel otherwise. While I commend Europe for working around numerous economic hurdles in creating the Euro, these present struggles seemingly indicate that all of the kinks haven’t truly been worked out.

Recently, French President Sarkozy indicated that France is at least considering drastic measures such as dropping the Euro (although I think this is highly unlikely). I certainly am not going to say that the Euro has been a disaster, but its struggles should illuminate the fact that a North American Union would be the wrong way to go.

Second, I believe that high levels of spending in Europe are partially responsible for this crisis. While many people of Europe seem to enjoy the high levels of government spending, it has not only created issues for the currency, but it has hampered long term growth of nations’ economies.



Glancing at the graph above, it is evident that over the last 45 years, the countries whose governments have spent ridiculous amounts of money have grown very little on an average annual basis. While the chart is simplistic, and only uses “average” annual growth, the point is clear. When a government choose to tax and spend insane amounts of money, economic expansion is severely hindered.

Once this crisis is over, I would hope that European nations (particularly Greece) can make better decisions with their money. While we’re on the topic, I hope that this nation can make better decisions with its money too.