Gas For $1.75 A Gallon & Depression Level Unemployment: The USA After A Euro Collapse

By Daniel R. Amerman, CFA


The US dollar could soar in value. Gasoline could return to under $2 a gallon, possibly even $1.75, and filling up a near empty tank could once again be done for under $30. The prices of clothes, shoes and a shopping trip to Wal-Mart could drop significantly, providing much needed relief to retirees on fixed-incomes. In the midst of global economic crisis, there could be an “Indian Summer” in the United States with a return to cheap oil and abundant imports at prices well below current levels. Standards of living could briefly rise – for those fortunate people who still have jobs and/or stable incomes.

As pleasant as it could be for some, this potential “Indian Summer” won’t change the bigger picture. If the Euro collapses (and that’s a big if), the end destination will likely be disastrous for the US economy, US employment and the value of the US dollar. For a US economy that is already reeling – the fall of the Euro and a corresponding implosion of European economies could take a bad situation and make it much, much worse. The brunt of this damage will be borne by the many millions of newly unemployed as well as retirees and investors, but many more will bear the pain.

However, the journey from a full Euro meltdown to the end results for the United States may take longer than many expect, and the particulars of the path could also take many by surprise. In this article, we will speculatively explore some of the potential twists and turns between Euro collapse and US economic disaster, and the economic logic that may drive them.

Starting Assumption: Euro Collapse & European Depression

Our starting assumption is the there is not only a collapse of the euro, but that this has a severe impact on Europe, pushing it into a continent-wide depression which slashes economic consumption as well as output. There are currently many opinions being offered in the financial media about why this may or may not happen, and we will leave it to those numerous articles to discuss the cases for and against a collapse.

Our objective herein is to do something quite different, which is to explore some of the surprising potential near and medium term effects of a European currency collapse on the lives of ordinary citizens in the United States, with the understanding that some of these effects may also hold true for other nations, such as Australia and Canada. This analysis complements my recent article, “Potential Euro Collapse & Rapid Redistribution Of Personal Wealth” (link below), which covers the particularly sharp redistribution of wealth that would occur within Europe itself.

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via Gas For $1.75 A Gallon & Depression Level Unemployment: The USA After A Euro Collapse.


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