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

No, this will not happen. If one figures out that GOLD is the ultimate currency, the smart move will be the ETF of gold like GLD. Gold has its own intrinsic value and can not be printed, any currecy has none and can be printed UNLIMITLY.

Answer 2

The very idea of the Euro was to help simplify international commerce across the Europian continent across one currency, a task which I thought at the time would be very unwise given the vast political and economic differences across the Europian continent. For example, if there was an economic crisis in Germany, the deutschemark would do the usual dance on the currency markets with losing its value relative to other currencies, but that would only affect people who do business within Germany and between Germany and other countries. Now, if there is a problem in Europe, the effect of such an economic crisis, even if it begins and stays within one country, will be widespread across all countries which conduct business in the euro. The economic and political effects would be widespread very quickly. If Europe were to truly become one country, (and I don't think that is at all likely for a variety of socio-political reasons) perhaps this would be possible. I don't think that GDP would be as much a factor as language and politics though.

Answer 3

Reserve currency happens and has happened through consensus, on what currency the trade should be denominated. For consensus to happen the particular currency need be stable, easily available and should bear good value along with it should be a consensus choice on which everyone has faith. American Dollar is the numero uno among currencies bearing all these charecteristics. It is also a stable economy, not countries joined up together like EU which limits the power of it's currency to sway as dollar. It will take centuries before Euro can achieve that status, moreover who will do the conversion on the already existing reserve currency reserves each country is holding. China holds close to a trillion of dollars, Japan close to half, India around 100 billion and the Europe itself close 1 trillion. Now when you change reserve currency who will accept all the dollars and exchange it for Euro. For example if China want to change over to Euro then who will give them Euros to the equivalent of 1 trillion dollars. It is a big task which I don't think is worth the effort.

Answer 4

The GDP isn't what concerns in words of reserve forex, yet quite that is (nominally) the forex in which commerce takes position that concerns. The Euro gained't replace the U. S.$ as reserve currecny, a minimum of for the subsequent 20 years a minimum of, and the reason being that the united states gained't enable it to take position. the U. S. runs huge funds deficits which it funds through subject matters people$ denominated bonds. the reason why the U. S. is in a position to discover waiting consumers for the bonds it subject matters is that the U. S.$ is the reserve forex par excellence. imagine this difficulty: Say faster or later, some center jap u . s . wanting to initiate trading its oil in Euros quite than US$ - then there will be an incentive for the trading companions of that center jap u . s . to initiate holding Euros as reserve forex thereby insulating themselves from forex shocks in the container of oil trading. this may inspire those tradin companions to change some reserves from US$ to Euros. the better the oil exports of that center jap u . s ., the better the impression on the willingness of a few thing else of the international to carry US$ as reserve forex. hence, they does no longer be keen to purchase the U. S.$ denominated bonds that keep up the U. S. monetary equipment. the outcomes will be dramatic for the united states. hence, you would assume some reaction of the U. S. authorities in route of that center jap monetary equipment, both to placed a end to that 'risky' practice and performance an get mutually to the different 'rogue' international locations. Sound accepted?

Answer 5

Already the Eurozone has a bigger GDP then the U.S. Mathew C is making an assumption that to change the reserve currency, there must be a "meeting" between nations to decide thusly. Why? When the dollar replaced the pound as the world's reserve currency, there wasn't any meeting of the nations to decide it thusly. People/nations dumped pounds for dollars and thus made the dollar the world's reserve currency. What makes Mathew think that can not happen again? Sure, there are more dollars in circulation than Euro's, but the ECB is catching up on Euro supply. I remember reading an article a few months ago that said the number of Euro's in circulation now is greater than the number of dollars in circulation (I wish I saved that article). So, if the other nations are tired of losing money in the dollar reserves each time the dollar falls in value, then by shear will of selling pressure will the Euro replace the dollar as the world's reserve currency.

Let's think about it this way; when the Euro first came out, it fell in value to 1 Euro equaling 84 cents. Since the middle east countries buy their food from Europe, each Euro they bought in food would only cost them 84 cents of their dollar holdings. But, now with the exchange rate at 1 Euro equaling $1.30, each Euro in food they buy, they need to come up the $1.30 out of their dollar reserves. Now do you know why OPEC is looking to switch oil sales from dollars to Euro's.

Many nations are looking to diversify out of their dollar reserves into Euro's or gold. If you look at the US dollar index, it's currently at 84. If the index breaks and holds below 80, then look for a panic exit out of dollars. Current price targets peg the downside level at 40 on the dollar index. At that level, the dollar will cease to be the worlds reserve currency as no one will want it, regardless of what the gov't of various nations want. If people won't accept dollars, then what can they do?

Mathew should be so snug as to assume the dollar can never be replaced as the world's reserve currency. We are on the verge of a dollar crisis and all that will need to trigger that is 1 large enough event and we can kiss the dollar good bye as the world's reserve currency.

Let's think about it, the concensus is that the dollar would have to be devalued by 50% to being to address the trade deficit, that would put the dollar index at 42. Foreign nations hold trillions of dollars, do you think they're going to sit by while they lose 50% of the value of their dollar holdings? I think not. Since 2001 to today, the dollar index has dropped from 120 to 84 and we're still running record trade deficits. At the 84 level, many countries are looking to diversify out of dollars. What do you think is they'll do if the dollar index falls to 70, or 60, or 50? It will be wholesale dumping of the dollar and the world will look to another currency as the means for payment settlement. That's kinda what happened with the Pound, as people lost faith in the pound and replaced their holding with dollars.

If things keep going the way they are (and I see no change in that), then the Euro will replace the dollar as the world's reserve currency.

Answer 6

I'm skeptical that the Euro will survive the first major financial crisis in one of the core nations.

Answer 7

1) Yes.
2) Because European countries are not bombed with airplanes.

Europe is already a bigger economy than the United States of America and it will get even bigger with the new countries.

Cyprus and Malta in 2008
Slovakia in 2009
Lithuania, Bulgaria and Estonia in 2010
Hungary, Latvia, Poland and Romania in 2011

The list goes on an on.

Answer 8

No. The Americans are capitalists to the bone, employees visit share sites on the internet at work!
Europeans are not so interested in investment, They are more likely to visit porn sites or otherwise do some 'cultural' thing in their spare time.

Answer 9

Confidence in the US$ will diminish