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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: zonder who wrote (267530)11/18/2003 8:56:02 PM
From: Hawkmoon  Read Replies (1) of 436258
 
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.

Figure the odds... The Europeans can't even manage to integrate themselves into a Confederation with an effective central government.

Currencies are backed by governments. Governments that are viable, stable, and have sound economic policies/history..

The Euro enjoys none of these qualities. If anything, the events of the past year have shown exactly how unstable the EU is.. (Old Europe versus New Europe).

Which makes for serious currency risk..

Secondly, even if the USD is declining, the fact that so many countries depend upon our economy to buy their exports almost guarantees that they will continue to hold those dollars, or purchase US assets with them (T-Bills.. etc).

This is the problem Europe is facing now with the surging Euro. It's not a sigh of economic health, IMO. But a sign that some money, deployed in the US, has sought an arbitrage in the Euro itself as a currency, but not really feeling comfortable deploying into European equities..

And some of that money was US money fleeing a declining US dollar that was overvalued to the detriment of the US manufacturing.

I might be more worried if we didn't still see near double digit (or more) unemployment in the major economies of Europe (which has been growing over the past year).

oecd.org

If people don't have job security, they aren't likely to spend the money it takes to spur a true economic recovery.

Hawk
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