The USD became the reserve currency primarily because everyone had less faith in the other liquid currencies.
Bingo.
And just like that, with USD falling from grace day by day, EUR is the only other liquid currency suitable for the job of "reserve currency". I think it is quite possible that this transition might occur.
If people are starting to lose faith in the $ as a reserve it is because we've become increasingly more socialist while the former communist countries are becoming more capitalist.
Or maybe it is because the US is not only embarked on what seems to be a neverending crusade of aggression on other countries, followed by spending billions of dollars of taxpayers' money on them, but also Fed has redefined "strong currency" as one that is hard to counterfeit. With the US state so hell-bent on bashing the USD, try to appreciate that countries that hold USD in as reserve might feel a bit disillusioned. And that has nothing to do with whether US is becoming more socialist or not.
Socialist countries have a natural bias towards inflation, everyone trying to get a little of their "fair" share from those that are the most productive
I would be interested to read about any examples you might have on this. It seems to me that in most socialist countries, certain important industries are state-controlled, and hence prices of main input materials - like electricity, oil, coal, cotton, etc - can be kept in control.
All depends on your definition of a "socialist country", of course.
And all of this is still not very relevant to what I had said: "Iam not sure I agree with you that Eurozone has to be more capitalistic for EUR to gain more space in the reserve coffers of the world."
As you agreed above, USD became reserve currency because everyone had more faith in its stability than other countries. Socialism, taxes, etc or their lack thereof had little to do with this choice. Now that this faith is fast eroding, EUR might very well step up as the next reserve currency. And its member states don't really have to adapt a more capitalist stance for that to happen. |
