Will the Euro become the standard?

[dotcoma]

Do you think the Euro will take the standard-exchange status away from the dollar? Currently the US dollar enjoys being used for 60% of global transactions + OPEC uses it for exchange. This means tons of $$$ for US banks in fees, and allows the US to spend way more than it has by taking loans from countries who hold US dollars.

I personally think the US will fight losing such supremacy. I think at most the US and the EU may come to the table (maybe the Yen too) and discuss a central currency exchange that is decided/benefit-from by all 3/2 regions (US, EU, Japan). The US might also attempt to counter the Euro by letting more LDC's (less developed countries) tag or out-right change to the dollar (like Argentina, Panama, and others have done).

What do you think? I think this is important because of the economic implications it could have for the US. Also, if the US was not the standard currency it could not take as many deficits without fearing repercussions, so perhaps wars would be less-frequent.

[Vee]

I don't know if it will but it is rumoured too if China keeps going the way they're going.

[tusaki]

Actually many banks now hold a "basket" of leading currencies, such as the dollar, the euro, the pound sterling and the yen. This, as opposed to just holding large quantities of dollars. So I do not think the euro will "replace" the dollar. We'll move to a more hybrid system, which includes other currencies besides the euro and the dollar. But this is not new, this is a process which has been going on since the 70's.

[GodBlessAmerica]

Quote by: dotcoma Do you think the Euro will take the standard-exchange status away from the dollar? Currently the US dollar enjoys being used for 60% of global transactions + OPEC uses it for exchange. This means tons of $$$ for US banks in fees, and allows the US to spend way more than it has by taking loans from countries who hold US dollars. I personally think the US will fight losing such supremacy. I think at most the US and the EU may come to the table (maybe the Yen too) and discuss a central currency exchange that is decided/benefit-from by all 3/2 regions (US, EU, Japan). The US might also attempt to counter the Euro by letting more LDC's (less developed countries) tag or out-right change to the dollar (like Argentina, Panama, and others have done). What do you think? I think this is important because of the economic implications it could have for the US. Also, if the US was not the standard currency it could not take as many deficits without fearing repercussions, so perhaps wars would be less-frequent.

The Euro will crash and burn IMO.

[SoccerfreakAB2]

Quote by: GodBlessAmerica The Euro will crash and burn IMO.

Kind of like how China will crash and burn given its current status compared to America right?

[GodBlessAmerica]

Quote by: SoccerfreakAB2 Kind of like how China will crash and burn given its current status compared to America right?

China is a whole different argument, but Europe is full of distrust between themselves and it is impossible for them to get along, so I could never see the Euro last past the honeymoon of being the new shiny toy.

[jose]

Today, wealth is created in the reserve currency countries when their banks approve loans. The amount of this wealth is considerable. According to IMF figures, the dollar holdings of the world's non-US central banks increased by approximately $145 billion in 1999. This means that the US either lent or spent these extra dollars in the rest of the world during that year, gaining either goods and services or interest payments for them, but that during the year it did not supply anything in return. By accepting the dollars without getting anything back, the rest of the world was giving the US a massive subsidy. In the eight years between 1992 and 2000, the world's central banks increased their dollar holdings by around $800 billion, effectively giving America a cost-free loan of the same amount.
http://www.feasta.org/documents/mone...yproposals.htm

[GodBlessAmerica]

Quote by: jose Today, wealth is created in the reserve currency countries when their banks approve loans. The amount of this wealth is considerable. According to IMF figures, the dollar holdings of the world's non-US central banks increased by approximately $145 billion in 1999. This means that the US either lent or spent these extra dollars in the rest of the world during that year, gaining either goods and services or interest payments for them, but that during the year it did not supply anything in return. By accepting the dollars without getting anything back, the rest of the world was giving the US a massive subsidy. In the eight years between 1992 and 2000, the world's central banks increased their dollar holdings by around $800 billion, effectively giving America a cost-free loan of the same amount. http://www.feasta.org/documents/mone...yproposals.htm

There are lots of bad loans around and the real estate bubble is a global deal, so even if all goes to heck, I think the USA will still be stronger in it's currency than the Euro.

[rmnunez]

I've heard of this tremendous wealth supposedly being a major international currency brings the US, but it isn't clear to me how this is supposed to work. Somehow the mere fact oil prices are rendered in dollars makes the US richer? If this is true and the sums as vast as indicated, there is an advantage to being a leading currency. If the Euro is to assume that role, the EU would get that wealth instead and I'm at a loss to see how this would be fairer.

The Euro recently has depreciated, so countries leaping at the opportunity of using Euros rather than dollars in their international transactions would be feeling that loss in value when purchasing from the US. If instead they stuck with the dollar, whose value is climbing with respect to most of the world's currencies, then they'd be finding the same volume of exports buys them more Euros than before.

[Matt W]

Europe is full of distrust between themselves and it is impossible for them to get along,

*laughs* Quite. Spoken like a man who doesn't know much about Europe! We have our disagreements, certainly, but to say we don't 'get along' is ridiculous.

[jose]

Quote by: rmnunez The Euro recently has depreciated, so countries leaping at the opportunity of using Euros rather than dollars in their international transactions would be feeling that loss in value when purchasing from the US. If instead they stuck with the dollar, whose value is climbing with respect to most of the world's currencies, then they'd be finding the same volume of exports buys them more Euros than before.

"The Federal Reserve's greatest nightmare is that OPEC will switch its international transactions from a dollar standard to a euro standard. Iraq actually made this switch in Nov. 2000 (when the euro was worth around 82 cents), and has actually made off like a bandit considering the dollar's steady depreciation against the euro. (Note: the dollar declined 17% against the euro in 2002.) http://www.ratical.org/ratville/CAH/RRiraqWar.html

the Euro/dollar rates change all the time in 2000 one euro bought 82 cents,now one euro buys$1.23 a gain for the euro of 41 cents or 50% on its value of five years ago. http://finance.yahoo.com/currency/co...USD&amt=1&t=5y

[monty of ll]

jose quoted: "The Federal Reserve's greatest nightmare is that OPEC will switch its international transactions from a dollar standard to a euro standard. Iraq actually made this switch in Nov. 2000 (when the euro was worth around 82 cents), and has actually made off like a bandit considering the dollar's steady depreciation against the euro. (Note: the dollar declined 17% against the euro in 2002.)"

Good point Jose! And that link lays it out as well as any other. This was one of the U.S. motivations for war with Iraq. And it's not over yet. If the Euro grows stronger against the dollar it will become inevitable and when that happens the U.S. is in big trouble.