I guess I'm just not as negative on Europe as are Henry and Zeev. In many respects, I am downright bullish on Europe.
While I can't argue with the problems that many European countries have with their type of capitalism, I don't think it is nearly the weight on their economies as is being suggested. I believe that the positives will far outweigh the negatives and produce a period of growth in Europe that will rival that which the U.S. has seen the past decade.
While I think the American system is superior, it isn't perfect and its flaws haven't prevented excellent economic growth. In fact, you could argue that it is the growth that provides the maneuverability to make the changes. I believe the same will be true in Europe, that the system will be gradually reformed as the riches from growth allow. I see the cause and effect the other way.
My optimism is squarely based on a completely different view of the Euro. I think it is a great idea and will prove the means of region wide unity and growth. I think that if the Euro were doomed, that the recent period would have been its demise. Now that it is rising, and I believe will continue to rise as the growth differential swings in Europe's favor, the criticism of it will wane.
The growth potential in Europe is far greater than that of the United States. As their unemployment rate declines it will put more money in the hands of consumers and will result in a virtuous cycle similar to that recently experience in the US. America, on the other hand, will grow solely by productivity gains as there is little room for growth by adding to the workforce.
This greater growth potential in Europe will mean that it will attract a greater proportion of investment, as growing areas always do. The currency flow will be toward Europe, rather than away from it, which will further bolster the currency and provide capital for the growth. The United States will focus more on trading partners in their own hemisphere and the dollar will weaken and the trade deficit narrow.
I'm predicting that the Euro and the dollar will become the world's two major currencies in the coming years. I think the relationship between the two has been skewed by speculation and an unsustainable level of growth in US consumer spending fueled by an equity bubble. In the years to come, I think a rate of 1.2 to 1.3 $US per Euro will be reached. |
