Just in case we needed another reminder, here’s why the United States cannot afford to just be a bystander in the European crisis.
This chart is in a report published by the North American arm of the Bertelsmann Foundation — the philanthropic and research arm of the huge German media conglomerate. As you can see, eurozone countries accounted for almost 34% of all the foreign money invested in the US in 2010. Add heavyweights like Switzerland and the UK to the mix and we see that over 60% of the foreign direct investment, i.e. foreign money going to US companies, products and workers, is from an increasingly shaky Europe.
So far a lot of the talk about European effects on the US has focused on the exposure of the US banks and shadow banking system to the troubled continent. Leaving aside the “don’t-worry-we-got-this” stance of US Treasury Secretary Tim Geithner, there hasn’t been as much written or said about Europe’s wider knock-on effects to the US economy. I’ll be keeping a very close eye on the May 6 presidential elections in France — especially on the markets’ reaction if challenger François Hollande wins out over Angela Merkel’s wing man, Nicholas Sarkozy. Whether they admit it or not, you can bet that Geithner, Bernanke, Obama, et al, will be doing the same.