Thursday, January 5, 2012

Eurozone - the strongest economic region of the world?

This article by Daniel Gross refers to some of the key macroeconomic indicators of the Eurozone, which are:

Current account - balanced in the Eurozone; US deficit over 5% of GDP
Fiscal deficit - 4% for the Eurozone; close to 10% in the US
Sovereign debt - around 80% of GDP in the Eurozone; around 100% in the US
Exhange rate - EUR buys about 10% more USD than at inception of the Euro

Now, if that is not a near-perfect score card, I don't know what is! A visitor from Mars would have to conclude that the Eurozone is the strongest business region and the Euro the strongest currency in the world.


  1. dear Mr. Kastner, I like your blog very much. Thank you for taking the time to put all this information together.

    Daniel Gross' article neglects a few things.

    Economic force (or economic health as laid out above) is only one of the three boundary conditions of the differential equation which determines success or failure of an economic structure. The other two boundary conditions are spiritual force and military force, and one must multiply these three values to evaluate success or failure.

    This means that if only one of these three factors falls to zero, or near zero, the resulting product does likewise.

    I believe that Gen. Eisenhower has first stated this in public, but the principle can also be found in the Bible.

    If applied to the US as compared with the Eurozone, it becomes very clear why the USA are the stronger economic region: spiritual force and military force are both close to zero in the Eurozone, not so in the US.

    best regards

  2. I agree with you entirely! I interpreted Daniel Gross' article more as a wake-up call in the sense that "the Eurozone is not totally bankrupt as many seem to suggest nowadays". Of course, the EZs debt level would be much higher if the recapitalization of banks had taken place like it did in the US. Its demographics are terrible (with implications for future financing needs). Its defense spending is minute compared with the US. Etc., etc.

    The real strong point about the EZ (in my opinion) is that its current account is balanced overall which I interprete to mean that the economy can sustain itself. If each member country were proportionally as good as the EZ overall, we would have no crisis. The crisis stems from the enormous current account imbalances within the Eurozone (at least in my opinion).