What would happen if the Euro currency went bust?
Each country would have to go back to its own currency, or the rich countries would just kick the poor ones out of the EU.  It would be bad for the poor countries, and the global economy would suffer, but it really wouldn't be a big deal. These rumors are here just to help dollar stay alive. Euro have problems, but they are rather solvable, unlike dollar situation. Even if something wrong would happen - countries would return to their national currencies, mainly Germany & France are important here. This does not means that EuroUnion would be destroyed - some countries live in EU without Euro and they are just fine. If the Euro went bust then it would be the 12th government currency to go belly up in Europe (according to this website).  Europe holds the record for most failed currencies.  It also holds the record for the worst hyperinflation in history - Yugoslavia 1993.  I'm not sure what would happen if the Euro failed.  It depends on how it fails.  If it fails quickly (which most do) then there will be bank runs, bank holidays, capital controls, massive price increases, price controls, and just general confusion as people race to get rid of their Euros.  Black markets for everything will pop up if the price controls remain in place.  Some countries may switch to a foreign currency (i.e. the US dollar if it is still around) until they can get their own currency in circulation. I'd have anything you would need for maybe 3-6 months stored up: food, fuel, toiletries, other incidentals.  What might replace the currency after the Euro collapses will be the least of your concerns when it does collapse. Krugman (Nobel prize in Economy) has just said: Greek euro exit, very possibly next month. Huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany. 3a. Maybe, just possibly, de facto controls, with banks forbidden to   transfer deposits out of country and limits on cash withdrawals. 3b. Alternatively, or maybe in tandem, huge draws on ECB credit to   keep the banks from collapsing. 4a. Germany has a choice. Accept huge indirect public claims on Italy   and Spain, plus a drastic revision of strategy — basically, to give   Spain in particular any hope you need both guarantees on its debt to   hold borrowing costs down and a higher eurozone inflation target to   make relative price adjustment possible; or: 4b. End of the euro. And we’re talking about months, not years, for this to play out. http://krugman.blogs.nytimes.com/2012/05/13/eurodammerung-2/ "The result would be catastrophic. The almost-reserve currency would collapse which would produce a medium sized depression, perhaps same with with 2008-now, or even larger, since don't forget, that one was produced from a housing bubble existing in only a part of the american economy; imagine what would happen if almost the full size of the economy (Europe) would collapse, even if Europe isn't as much ""connected"". But reality here is, there's no chance to that. The real reason you hear those rumors is that America (along with minor partners like the British Sterling) want to bring down the Euro for medium-term benefit. e.g. Several economists get on Bloomberg announcing they are short selling the Euro. Irony is, all this is helping the Euro since selling and short-selling and selling and short-selling helps massively its liquidity. It's like several nay sayers actually making a politician famous with their spite."
There are many different things that can happen, all or some. Taking Russia and Argentina as precedence - you may not be able to withdraw funds from your bank for some period of time. Not because your accounts will be drained, but because the cash supply will be restricted. Similar thing has also happened recently in Cyprus. However, the fact that the governments of Russia and Argentina limited the use of cash for a period of time doesn't mean that the US government will have to do the same, it my choose some other means of restraint. What's for sure is that nothing good will happen. Nothing will probably happen to your balance in the bank (Although Cyprus has shown that that is not a given either). But I'm not so sure about FDIC maintaining it's insurance if the bank fails (meaning if the bank defaults as a result of the chain effect - you may lose your money). If the government is defaulting, it might not have enough cash to take over the bank deposits. After the default the currency value will probably drop sharply (devaluation) which will lead to inflation. Meaning your same balance will be worth much less than it is now. So there's something to worry about for everyone. There are various indexes on the stock market that track the currencies.  Though it is different than Forex (probably less leverage), you may be able to get the effects you're looking for.  I don't have a lot of knowledge in this area, but looked some into FXE, to trade the Euro debt crisis.  Here's an article on Forex, putting FXE down (obviously a biased view, but perhaps will give you a starting point for comparison, should you want to trade something specific, like the current euro/dollar situation). It depends on what actions the European Central Bank (ECB) takes.  If it prints Euros to bail out the country then your Euros will decline in value.  Same thing with a US state going bankrupt.  If the FED prints dollars to bailout a state it will set a precedent that other states can spend carelessly and the FED will be there to bail them out by printing money. If you own bonds issued by the bankrupting state then you could lose some of your money if the country is not bailed out. In many countries in Europe the prices shot through the roof, so it is not all positive. Also the switching country gives out lot of monetary control that is not welcomed by many.  I think that UK is not going to change to euro for a long long time. Short the Pound and other English financial items.  Because the English economy is tied to the EU, it will be hit as well.  You might prefer this over Euro denominated investments, since it's not exactly clear who your counterpart is if the Euro really crashes hard.  Meaning suppose you have a short position Euro's versus dollars, but the clearing house is taken down by the crash. "If there is a very sudden and large collapse in the exchange rate then because algorithmic trades will operate very fast it is possible to determine “x” immediately after the change in exchange rate. All you need to know is the order book. You also need to assume that the algorithmic bot operates faster than all other market participants so that the order book doesn’t change except for those trades executed by the bot. The temporarily cheaper price in the weakened currency market will rise and the temporarily dearer price in the strengthened currency market will fall until the prices are related by the new exchange rate. This price is determined by the condition that the total volume of buys in the cheaper market is equal to the total volume of sells in the dearer market.   Suppose initially gold is worth $1200 on NYSE or £720 on LSE. Then suppose the exchange rate falls from r=0.6 £/$ to s=0.4 £/$.  To illustrate the answer lets assume that before the currency collapse the order book for gold on the LSE and NYSE looks like: GOLD-NYSE   Sell (100 @ $1310) Sell (100 @ $1300) <——— Sell (100 @ $1280) Sell (200 @ $1260) Sell (300 @ $1220) Sell (100 @ $1200) ————————— buy (100 @ $1190) buy (100 @ $1180)   GOLD-LSE Sell (100 @ £750) Sell (100 @ £740) ————————— buy (200 @ £720) buy (200 @ £700) buy (100 @ £600) buy (100 @ £550) buy (100 @ £530) buy (100 @ £520) <——— buy (100 @ £500)   From this hypothetical example, the automatic traders will buy up the NYSE gold and sell the LSE gold in equal volume until the price ratio ""s"" is attained. By summing up the sell volumes on the NYSE and the buy volumes on the LSE, we see that the conditions are met when the price is $1300 and £520. Note 800 units were bought and sold.   So “x” depends on the available orders in the order book. Immediately after this, however, the price of the asset will be subject to the new changes of preference by the market participants. However, the price calculated above must be the initial price, since otherwise an arbitrage opportunity would exist." "Why will they find financing when they leave the Euro? Why would their currencies not simply hyperinflate due to excessive issuance in an attempt to devalue? Which is worse for unemployment, austerity or hyperinflation?  &gt;they'd be expelled by Germany  This is a union correct? Why do you assume Germany holds all the cards? I've read that Gonzalo Lira essay and have read Mish about everyday since 2009, yet still do not think it is so obvious that the Euro will collapse.  I gained quite a bit of skepticism from Barry Eichengreen's paper on the [Breakup of the Euro Area.](http://www.nber.org/papers/c11654.pdf?new_window=1)  What I see right now is that so far the ECB has only acted in such a way as to prevent outright deflation and meet its 2% inflation target, but not to continuously outright fund the profligate governments. They let the bond markets force those governments into contraction or into default whereas the fed, with its dual mandate, will always buy the US bonds and eventually will inflate the currency as opposed to having a sovereign default.  So I think we will see the ECB continue to print as much is needed to meet its mandate but at the same time there will be defaults, bank nationalizations and failures, and a continued lack of growth in the Euro area until eventually the austerity measures bring revenue and spending in line at which point the countries under heavy debt would be stupid not to default because they can self finance.  Whereas in the US we are so dependent on deficit financing that as foreigners move further away from holding treasuries we become more susceptible to bond vigilantes taking the reigns which will force the feds hand into outright monetization. Then I think we will see our own government exacerbate inflation by bidding on the same goods that those dollars which no longer are going into treasuries are bidding on. Then I think we'll finally see bad inflation in the US.  Of course as long as there is hoards of money fleeing Europe for the US ""safe haven,"" the lack of foreign treasury investment is pretty moot.   *spelling" I suppose they still could risk hyperinflation? Anyways, if they got their own currency that would probably be positive for their exports. Still, what are they going to export? Buying any raw materials would be super expensive with their devalued currency. What is your thought about their exporting with devalued currency? I am going to clone an answer from another question that I wrote ;) and refer you to an article in the Wall Street Journal that I read this morning,  What's at Stake in the Greek Vote, summarizing the likely outcome of the situation if a Euro exit looks likely after the election: ... we will see a full-fledged bank run. Greek banks would collapse ... The market exchange-rate would likely be two or three drachmas to the euro, which would double or triple the Greek price of imported goods within a few days. Prices of assets, including real-estate assets, would crumble. Those who moved their deposits abroad would be able to buy these assets cheaply, leading to a significant, regressive redistribution of Greek wealth. In short, you'd lose about two-thirds of your savings unless you were storing them somewhere safe from the conversion. The article also predicts difficulty importing goods (other nations will demand to be paid in euro, not drachma) leading to disruption of trade and various supply shortages. &gt; The European economy was not utterly doomed before the Euro, therefore the fall of the Euro does not doom their economy.  I'm not sure how that's related at all.  Just because at some random point in time, the European economy was doing OK, doesn't mean that it will definitely be ok again in the future after a jarring multi-national currency shift.  There are tons of other factors in play.  First of all, who's going to accept drachma again?  What is it worth?  What about pesata and lira?  These currencies haven't been used in over a decade.  Who is going to value them?  Who is going to accept them?  What happens when the Greeks default?  When their pension checks start bouncing?  This is what Germany is fearing.  Who is going to buy their products when there is a major currency crisis going on? Rising rates is going to counteract the asset bubble and Draghi &amp; the rest of the ECB are well aware of this. Now that Spain &amp; Italy got their shit together they're going to go full steam ahead.   Also Germany specifically is in trouble given its large companies such as BASF and others are threatened as companies on countries globally are consolidating and a focus by domestic experts on the trade deficit the U.S. holds with Germany.   The European economy will be fine. Certain European assets too, but do not be too sure on the DAX. I can't think of any specifically, but if you haven't already done so it would be worthwhile reading a textbook on macro-economics to get an idea of how money supply, exchange rates, unemployment and so on are thought to relate.   The other thing which might be interesting in respect of the Euro crisis would be a history of past economic unions. There have been several of these, not least the US dollar (in the 19C, I believe); the union of the English and Scottish pound (early 1600s); and the German mark. They tend to have some characteristic problems, caused partly by different parts of the union being at different stages in an economic cycle. Unfortunately I can't think of a single text which gathers this together. The Swiss franc has appreciated quite a bit recently against the Euro as the European Central Bank (ECB) continues to print money to buy government bonds issues by Greek, Portugal, Spain and now Italy.  Some euro holders have flocked to the Swiss franc in an effort to preserve the savings from the massive Euro money printing.  This has increased the value of the Swiss franc.  In response, the Swiss National Bank (SNB) has tried to intervene multiple times in the currency market to keep the value of the Swiss franc low.  It does this by printing Swiss francs and using the newly printed francs to buy Euros.  The SNB interventions have failed to suppress the Swiss franc and its value has continued to rise.  The SNB has finally said they will print whatever it takes to maintain a desired peg to the Euro.  This had the desired effect of driving down the value of the franc. Which effect will this have long term for the euro zone? It is now clear that all major central bankers are in a currency devaluation war in which they are all trying to outprint each other.  The SNB was the last central bank to join the printing party.  I think this will lead to major inflation in all currencies as we have not seen the end of money printing.  Will this worsen the European financial crisis or is this not an important factor? I'm not sure this will have much affect on the ongoing European crisis since most of the European government debt is in euros. Should this announcement trigger any actions from common European people concerning their wealth? If a European is concerned with preserving their wealth I would think they would begin to start diverting some of their savings into a harder currency.  Europeans have experienced rapidly depreciating currencies more than people on any other continent.  I would think they would be the most experienced at preserving wealth from central bank shenanigans. It's slightly more complicated than that. Usually a country that was in Greece's situation would be able to use inflation to devalue their currency which would have the effect of lowering the value of the government's debts and also of making Greek prices more competitive in the international market. Or they could use quantitative easing to inject cheap cash into the economy to help stimulate it. Because Greece is on the Euro, however, they have no control over their own currency and their options are highly limited. Additionally, when you join the EU, especially the Eurozone, that's supposed to come with additional internal responsibilities, but it's also supposed to come with additional external ones as well. Greece has a responsibility to get its shit together, but the whole point is that more financially stable countries have a responsibility to help them. Right now that means Germany; they're the ones with the greatest control over the Euro and they're shying away from their duties. If the rest of Europe didn't want to risk ending up in this position they shouldn't have let Greece into the Eurozone. "&gt; Just because at some random point in time, the European economy was doing OK, doesn't mean that it will definitely be ok  I'm not claiming it will be ""definitely be ok"".    definitely ok != utterly doomed.  &gt; What happens when the Greeks default?  If they were paying in drachma, they wouldn't default.  They'd print more drachma and inflation would occur.   That's how currency imbalances adjust.  Germany wants it both ways.  They want a stable Europe-wide currency but they don't want a Europe-wide economy, they want their economy isolated from the problems in the rest of Europe.  Germany should leave the Euro."