12 Eurozone Downgrade Shock Waves Could Slam Into US Economy
BY DANIEL AMERMAN CFA
Standard & Poor’s missed the point when they “only” put 15 Eurozone nations on credit watch for possible near term downgrades. In this highly interconnected world – most of Europe can’t be put on credit watch without putting much of the world on credit watch, with the United States being particularly vulnerable to global “contagion” risks.
Twelve possible implications for the United States are concisely explored herein. These “shock waves” include everything from the value of the dollar, to unemployment, gas prices, stock prices, derivatives, US bank stability, inflation, retirement investing, Federal Reserve reactions, the US deficit and credit rating, the potential criminal prosecution of S&P, and more.
Each potential “shock wave” assumes: a) that Eurozone leaders fail to credibly reach consensus; b) that this political breakdown does lead to an actual credit downgrade; c) that several European nations default on their debts; d) that there is least a partial collapse in the value of the euro; and e) that this all leads to a major downturn which materially reduces the size of the European economy. Those assumed events will not necessarily happen – much is still in play – but if even a partial Eurozone collapse does occur, then the resulting “shock waves” could rapidly change lives, standards of living, and investment values in the US and around the world.