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Economic Review

3/1/2010

Is the picture all that bleak for the EURO currency?  Let’s take a look at things on a relative basis.

Over the past few weeks, the once mighty EURO has been beaten down some 10% versus the US$ as fears over the problems with the Greek economy has many fearing a contagion within the EUROZone.  But perhaps, the situation is not as dire as many think, when considering things on a relative basis.  By relative we mean, relative to the financial underpinnings of the two other major global currencies…the US$ and the Japanese Yen.

Yes, the turmoil in Greece is somewhat disturbing given the doom and gloom scenario of their potential inability to finance their situation.  But let’s put things in perspective.  Greek GDP comes in at a whopping $350 billion (roughly).  The US unfortunately has its own albatross and this comes in the shape of a large state referred to as California which may be classified as technically bankrupt.  According to some calculations, California is considered to be about the seventh largest economy on the planet and accounts for about 13% of US GDP. By the way…that’s nearly 2 trillion US$.  In case you see a safe haven in Japan, just consider that its national debt is in the range of US$ 7.5 trillion which is only about 170% of its GDP.

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