Europoor, America Rich

Europoor, America Rich

Americans in Europe feel rich. Europeans in America feel poor. Both are looking at the same imbalance, but from opposite ends. Rebalancing is how the West builds allied scale.

Nicolas Colin

Oct 31

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Preview

Hi, I’m Nicolas, Head of Research at Vsquared Ventures. Over the past few weeks, I’ve described a complex machine, the West’s economy, from three angles:

• The West’s Carry Trade Against Itself. Europe exports its surplus savings to inflate American financial assets. Meanwhile, America, having lost much of its capacity to build, imports what it can’t make, mostly from China. The West as a whole can’t reindustrialize until American capital meets European factories.

• Why America Runs Hot. Three self-reinforcing loops (dollar demand, trade, and the overflow) pull the world’s savings into US assets. They keep the dollar strong, push US investors up the risk curve, and deliver capital to US startups. Yet most of the money ends up inflating existing assets, with the engine running too hot.

• Why Germany Runs Cold. Wage restraint keeps German households from spending, a relatively weak euro lets firms sell the unsold output abroad, and German savings end up funding America. Germany has the engineers, the factories and the savings, yet too little demand at home to use them.

Today I want to look at that exact same machine, but from a different perspective: that of people on the ground, what they produce, and, above all, what they spend.

If you spend time online, you’ve probably come across the word “Europoor.” Americans use it to mock Europeans who earn little, live in small apartments without A/C, and never seem to buy anything. Meanwhile, Europeans have their share of terrible stories set in America: unaffordable housing, medical bankruptcies, and lower life expectancy.

Both complaints are partly true. And as it happens, the West’s carry trade is the mechanism that connects them. Europe holds down wages and consumption at home, saves the difference, and ships it across the Atlantic, where incoming flows keep the dollar strong, inflate American asset prices and let Americans spend more than they produce. It shouldn’t be a surprise, in this context, that Europeans feel poor and Americans feel rich. This is the whole system’s logical outcome.

That doesn’t mean we shouldn’t try to fix it. Read along to understand how 👇

1️⃣ Two tourists, one problem.

Imagine an American who has just landed in Lisbon. She orders grilled fish, clams, and two bottles of vinho verde. Then the bill is so small she has to verify it twice. Later, she learns what the waiter earns in a month and doesn’t understand how he gets by.

Now picture a Parisian in Brooklyn. He pays $24 for a turkey sandwich in an ordinary deli and wonders how anyone affords the rent around here, let alone a hospital bill.

What happens is that once each tourist converts prices into their own currency, they can only conclude that one country is rich and the other poor. And if you’re looking at how much things are priced, it’s true: in 2024, according to the OECD, prices in America ran 30% above Germany’s, 62% above Spain’s, and 75% above Portugal’s.

Now let’s take a step back. The Portuguese waiter’s pay and the New York deli’s prices are in fact the two ends of the machine I’ve described in the last editions.In this context, “Europoor” measures things that Europe leaves idle: savings, factories, engineers, and demand in general. And as for “America Rich,” it measures what America can’t sustain forever: rising debt, a strong dollar, and an industrial base hollowed out by both.

My view is that because the two are obviously linked, they can only be fixed together. In fact, doing so is the shortest route to allied scale and turning the Atlantic into one integrated financial and industrial system.

2️⃣ Europe produces a lot, but spends little.

Measured at purchasing power parity (PPP), output per person in the Eurozone was 75% of the US level in 2025. PPP compares countries using local prices instead of exchange rates. It asks a simple question: how much can people buy with what their economy produces? For example, under PPP, a haircut costing €15 in Lisbon and $50 in Brooklyn counts as the same amount of output in both places.

Yet household consumption per person in the Eurozone, also measured at PPP, was only 56% of the US level last year. What it means is that there’s a weird European gap between output (75% of the US) and household consumption (56% of the US). That gap has even widened from 11 percentage points in 2000 to 19 today. The key point here is as follows: the Eurozone’s relatively lower output does not fully explain why its households consume so much less than their US counterparts. There’s more to “Europoor” than Europeans simply being less productive.

Now, part of the gap can be explained by accounting. For instance, household consumption leaves out the healthcare and education that European governments pay for. That said, on the OECD’s broader measure, which includes those categories, Europe still consumed only 60% of the US level in 2024, against 59% in 2000.

So where does the difference go? As I explained in Why Germany Runs Cold, wage restraint and a habit of saving leave some European households, notably in Germany and the Netherlands, spending too little. Their savings then leak abroad through ETFs and insurers’ funds, land in US Treasuries and blue-chip stocks, and push American investors up the risk curve through the overflow mechanism. In 2025, the Eurozone ran a current account surplus of about $305 billion; at the same time, America ran a deficit of about $1.1 trillion. There’s a direct connection between both.

Of course, for each German insurer, or each household saving through a monthly ETF plan, buying American tech looks like the sensible choice: it’s clearly the best way to earn good returns. But added up across the continent, those institutional and individual choices starve those who want to build in Europe and desperately need capital for it. And on the other side, they contribute to inflating US assets. AQR found that US stocks beat other developed markets by 4.7 points a year over 35 years, 3.8 of them from rerating, that is, investors paying more for each dollar of the same profits.

And so we seem to have an explanation: Europe’s missing consumption (“Europoor”) corresponds to the savings that finance America’s boom (“America Rich”).

3️⃣ Europe and America can only fix this together.

As always with this newsletter, my view is that Europe’s surplus and America’s deficit are two entries in the same ledger. A corollary is that neither side can fix its half alone. In fact, as a rule of thumb in macroeconomics, if you reduce the current account deficit, you mechanically reduce the capital account surplus, which means that if Europe keeps its savings at home, America has to borrow less. What that also means is that each side has to contribute to the effort in a coordinated manner—more investment in Europe, less borrowing in America.

On both sides, there are obvious benefits in doing so in a coordinated manner:

• Europe can spend its savings on scaling its own economy. It’s about letting pay and demand grow, perfecting the single market, building a capital markets union, and investing in energy, defense, factories, and deep tech at home.

• America can trade asset inflation for physical capacity. It’s about saving more, importing less, accepting a weaker dollar, bringing down the cost of healthcare and housing, and inviting European firms to build plants on American soil.

But should America and Europe try to address the problem in an uncoordinated manner, each side would take a big risk:

• If Europe acts alone and keeps its savings at home, Europeans lose first. A fast-rising euro makes their exports pricier, while their American stocks and bonds lose value. America then loses much of the $1.1 trillion it borrows abroad each year, so capital costs more and Americans buy fewer European goods as a result.

• If America goes alone and closes its deficit with tariffs or a weaker dollar, Americans lose first. They pay more for everything they import, and US firms that rely on foreign parts face higher costs and lower margins. Europe then loses its best customer, America, leaving its factories idle before customers at home can replace it.

By contrast, done together and at the same pace, each side has the ability to cushion the other: European firms can find new customers at home as they lose American ones; meanwile, money leaves America slowly enough to avoid a crash.

The endpoint is my definition of allied scale: the Atlantic as “one integrated financial and industrial system, pairing American capital and innovation with European process knowledge, engineering talent, factory depth, and high purchasing power.” And in that consolidated version of the West, our two tourists, the American in Lisbon and the Parisian in Brooklyn, would end up paying about the same for dinner!

Here’s what I’ll discuss along the way:

• How much of the “Europoor” gap is prices, and how much is a real productivity gap?

• What exactly is Europe leaving idle, and what is America’s affluence resting on?

• Why does each side’s dysfunction keep the other’s going?

• What should Europe and America each do, and where does it end?...

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© 2026 Nicolas Colin
Cadre Noir SARL | France 🇫🇷