Some analysts believe that a collapse of the EU will have a calamitous effect on the U.S. economy. But exactly how will that play out, that is, who will get hit the hardest?
Although every state would feel the effects of a possible EU collapse, as a halt of billions of dollars in exports to the EU could prove to be disastrous, analysts believe there are some states in particular that will bear the brunt of the burden.
As it turns out, Utah, South Carolina, Indiana, Alabama, Washington state, and West Virginia, all relying heavily on exported commodities, will most likely suffer the worst, according to a new study by Wells Fargo Securities.
"We don't think it's enough to pull us into recession, but exports have been one of the lone bright spots in our economy," said Mark Vitner, senior economist at Wells Fargo Securities who co-authored the report, according to the Huffington Post.
In Utah, which has an economy that relies on selling gold and silver produced in nearby states, European exports comprise 46 percent of all exports and 5.6 percent of the state's economic output, according to the Wells Fargo report, writes the Post.
Or consider the case of South Carolina, an automobile manufacturing hub, where European exports make up 4.1 percent of the economy.
West Virginia's economy is closely tied to the coal industry. Exports to Europe make up nearly 4 percent of the state's GDP. So as Europe's economy sinks, so too — the argument goes — will West Virginia's GDP, reports the Global Post
Eight of the U.S.'s top 30 trade partners, according to the Department of Commerce, are European countries. However, some remain optimistic and maintain that a lower demand for exports would not necessarily plunge the U.S. deeper into recession, since exports account for just 11 percent of the U.S. economy, according to the World Bank.
“Slow growth in Europe has already restrained U.S. economic growth,” said Vitner, according to the Huffington Post. “U.S. economic growth would have been 2.5 percent in 2012 -- in contrast to Wells Fargo's current prediction of 2.1 percent -- if the European economy was growing at a healthy pace.”
Although an absence of exported goods due to a collapse of the EU could prove harmful to the U.S. (and some states in particular), just think about the economic fallout for the banks.
In the word's of Harvard historian, and as reported earlier on The Blaze, Niall Ferguson writes:
Europe’s problem is not just that governments are overborrowed. There are an unknown number of European banks that are effectively insolvent if their holdings of government bonds are “marked to market”—in other words, valued at their current rock-bottom market prices.
Because of the existence of our present global economy, some U.S. financial institutions will naturally be affected by the euro banks collapsing, The Blaze reported.
Consider the fact that some of the biggest U.S. banks have some sort of “exposure” to euro bonds and banks. If the euro banks become “effectively insolvent,” this will affect the U.S. banks that have investments in those bonds.
To put it plainly, things are not looking good.