Do you think the Euro will ever replace the dollar as the worlds largest reserve currency?

Question

why or why not?

* ** I mean if you took all the countries GDP's that use the Euro, would it not be a larger economy than the USA?

Answer 1

Possibly, but its a long way off if it going to happen.

Answer 2

The GDP isn't what matters in terms of reserve currency, but rather it's (nominally) the currency in which trade takes place that matters.

The Euro will not replace the US$ as reserve currecny, at least for the next two decades at least, and the reason is that the USA will not allow it to happen.

The US runs huge budget deficits which it finances via issues of US$ denominated bonds.

The reason why the US is able to find ready buyers for the bonds it issues is that the US$ is the reserve currency par excellence.

Imagine this scenario:

Say one day, some Middle Eastern country decided to start trading its oil in Euros rather than US$ - then there would be an incentive for the trading partners of that Middle Eastern country to start keeping Euros as reserve currency thereby insulating themselves from foreign exchange shocks in the field of oil trading.

This would encourage these tradin partners to switch some reserves from US$ to Euros. The larger the oil exports of that Middle Eastern country, the larger the impact on the willingness of the rest of the world to hold US$ as reserve currency. Therefore, they wouldn't be willing to buy the US$ denominated bonds that sustain the US economy. The results would be dramatic for the USA.

Therefore, you would expect some reaction of the US government towards that Middle Eastern economy, both to put a stop to that 'dangerous' practice and serve as an example to any other 'rogue' countries.

Sound familiar?

Answer 3

The very theory of the Euro grow to be to help simplify international commerce throughout the Europian continent throughout the time of one forex, a job which i presumed on the time will be very unwise given the tremendous political and monetary transformations throughout the Europian continent. as an get mutually, if there grow to be an monetary disaster in Germany, the deutschemark would do the regular dance on the forex markets with dropping its cost relative to different currencies, yet that would in trouble-free terms impact those who do organization interior of Germany and between Germany and different international locations. Now, if there's a issue in Europe, the outcome of such an monetary disaster, regardless of if it starts and continues to be interior of one u . s ., will be conventional throughout the time of all international locations which habit organization in the euro. the monetary and political outcomes will be conventional very rapidly. If Europe were to quite grow to be one u . s ., (and that i don't think of it is in any respect in all probability for a spread of socio-political causes) per chance this may be plausible. i don't think of that GDP will be as a lot a aspect as language and politics besides the undeniable fact that.

Answer 4

Actually the eu is richer if it is all counted in euro's (Britain still has the pound) the GDP of the USA is approxiamatly 12 trillion dollars where as the combines EU GDP is approxiamatly 14 trillion.

Answer 5

I don't think the Euro will replace the pound let alone the dollar. Currency is one of the constituents of national identity, I wonder whether more countries might pull out of the Euro as they find trade routes opening up after joining it, and return to their old currencies.

EEC what's the point ?

Answer 6

I sincerely hope not, because it will mean that we have a federal states of europe, and the commies will have taken over.

Answer 7

No except the truth and change yopur views.

Answer 8

Yes,it is certainly looking that way!