What would be the immediate consequences if Portugal decide to leave the Euro?

At the day of that decision, it is expected that all financial transactions in Portugal would be suspended including deposits retrievals, except of small amounts for daily needs.

The new Portuguese currency would suffer an immediate devaluation, comparing with the Euro or Dollar, which means that the Portuguese workers’ salaries would also suffer a real devaluation.

Therefore the living cost in Portugal would increase a lot in just 24 hours.

The new reality will generate some chaos because many people, would run to stores as fast as possible to buy everything they can, trying to avoid the huge price inflation expected in result of their country leaving the Eurozone.

The decision of leaving the Eurozone will generate social unrest and can even occur some riots.

This outcome is expected if this decision is made in countries as Portugal, Spain or Greece due to their current financial situation, and this opinion is shared among many economists.

Dollar to Euro - My Economic Prediction on 22nd Oct 2008

I answered a question in linkedin on the 22nd October 2008, where I predicted that Dollar would loose value to Euro in the near future.

It's time to do the math.
22nd Oct 2008 - 1 Dollar = 0,7786 Euro
26th Nov 2009 - 1 Dollar = 0,6635 Euro
So, Dollar devaluated to Euro 15% in the last 13 months

Click here to see this question on linkedin forum.

So, in 2008, I recommended a "Great Deal" to India, as you can read bellow.

The question was:
Would it be a good strategy for India to borrow trillions(or whatever is available) of dollars?

And my answer was:
It could be a great move if:
- India borrow in Dollars
- Buy immediately another solid currency as “Euros” with those borrowed Dollars
- And by keeping the original debt in Dollars, is expected that Debt will have a value decrease automatically if India previously converted those financial assets to another currency as “Euro”.

Note that although European Central Bank also pumped some millions of Euros to the market, it wasn’t even close of the sum that American Federal Reserve pumped into the market, so it is expected that Dollar depreciate more to the Euro.

To all Americans that read this, Dollar depreciation also could bring good news for you.

Although the goods that America imports are going to be more expensive, your products made in America will look cheaper to the rest of the world, and so is expected a increase in your exports, boosting American Economy.

However there is a great risk that with dollar depreciation, America Demand worldwide will decrease even more and that could affect other economies that are dependant of their exports to the US, creating a “Domino effect” of recession worldwide.

In my opinion, with globalization, fewer countries are exclusively dependant of one country to export their goods, and so, with the actual economic scenario almost all countries will suffer a little with America demand decrease, but only a few countries will suffer a lot, and probably that will not generate a “Domino effect”.