How The Euro Crisis Could Destroy The U.S. Economy!

• And not just the US economy but the world economy. This will not be confined to EU and US. Japan is also bankrupt with debt to GDP above 200%! The Chinese relies on exports and when the industrialized world tanks, it will not escape. Domestic consumption alone will not allow it to create sufficient jobs for its tens of millions of migrant workers.
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  How the Euro Crisis Could Destroy the U.S. Economy! 
  by http://www.theatlantic.com/
  Europe is closer than you think to bringing down the American–and, therefore, the global–economy.
  This is the worst-case scenario from Europe, and it just might come  true: Italy defaults on its debts. Every major Italian bank collapses.  Recession grips the eurozone. Sovereign defaults and bank failures  ripple across the Continent. Saddled with bad loans to nations and  lenders in Europe, American banks hemorrhage cash. Credit freezes in the United States. Multinational companies, unable to raise money, curb  U.S. investment and hiring. Wall Street demands, but fails to get, new  bailouts. The entire developed world plummets into recession and, quite  possibly, depression.
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  This, in contrast, is the placid warning  that President Obama gave Americans about the threat: “If Europe is  contracting,” he said on Monday, “then it’s much more difficult for us  to create good jobs here at home.” There’s still a chance that  Europeans, through some combination of fiscal and monetary action, can  stop the crisis before it shatters the feeble U.S. recovery. But the  worst case is so much worse than Obama’s description, and  Washington has failed to prepare voters for the possibility. “The  [potential] shock we’re talking about is of very large magnitude,” says  Viral Acharya, a New York University professor who studies financial  risk extensively. “If you’re just having an Armageddon coming your way,  [America’s] buffers may not be adequate.”
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  The eurozone’s struggles are already hurting the U.S. recovery. Stocks have fallen, and exports  to the European Union–the world’s largest economy–are dropping as the  Continent slides into recession. In the best case, the pain inflicted on the United States basically stops there. Europeans marshal the  political will to bail out Italy and Spain, and they wall off Greece  from the financial system at large. Lending slows but doesn’t stop. The  European recession proves comparatively mild, and America avoids one.
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  But the situation could worsen quickly for the United States. The biggest  risk is a massive credit freeze. Loans from European banks account for  one-fifth to one-quarter of the American lending market, Acharya says,  and loans from those banks would disappear fast if they begin tumbling  under bad sovereign debts. American banks would likely pull back on  lending, too. Consumers and businesses would curb spending. “The  precipitating event for the global financial crisis and the Great  Recession was the bankruptcy of a single, relatively small  broker-dealer, Lehman Brothers. The bankruptcy of a nation as large as  Italy would be many times more severe,” says Karl Smith, an economist at the University of North Carolina who cowrites the popular economics  blog Modeled Behavior. “In theory, there is no limit to how bad it could get.”
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  … for more click here!

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