May 1, 2012
euro vs doller
It is undeniable that the euro has everything it takes to be an international currency, and therefore should gradually challenge the dollar. First, the changeover took place without problems. The euro book arrived in
early 1999. It has become slower than expected, but is now run by efficient banking systems and payments are made without any difficulties in the area. The euro cash meanwhile arrived in early 2002, and people have adopted the new notes and new parts in a few weeks. Despite the reservations and criticisms that exist here and there, it is hard to come back to notes and coins in francs. And now the euro is the currency of a country whose entire population is that the United States, whose GDP is just shy of the U.S. GDP
The euro area is even much more open than the dollar zone: the Twelve are 30% of world trade, the U.S. 15%. If we add tourism - and Europeans are traveling a lot - and even the underground economy, because the biggest euro banknote is worth five times the largest dollar ... it is clear that the euro has good reasons be used and be held beyond its borders. It may be more than one country to another we do not just trade, it also makes financial transactions. And the euro area is also very open to international finance. Direct investment or portfolio investment abroad of the Twelve are the same as those of the United States. Need we add that the financial markets in the euro area are almost as good and as well organized in the United States. Finally, the international role of the euro may grow even more than the mark, and to a lesser extent the Swiss franc or the florin, were already used outside their borders, and that the euro has naturally replaced.
But if the euro can, of course, compete with the dollar, will he actually do? How far can it replace, how long, how? It is very difficult to be precise on this point. To be used in the world, it is first necessary that the euro is requested. But behavior change slowly, the habits die hard, both households and businesses do not change easily change. Moreover, it is easier to use a single currency rather than more ... It's kind of the same problem with the language! Finally the euro will be sought that it is relatively stable and it does not depreciate against the dollar. It is known that the exchange rate of a currency does not evolve only according to "core" of an economy, it is more dependent on both capital flows which are very unstable and expectations of economic agents. We also know that the exchange rate is the value of a currency against another. The situation in the U.S. economy, its growth rate, the deficit or outside, react on the dollar ... and so on that of the euro. Any prediction is difficult. The euro was worth $ 1.17 at the start and saw that some people ended up to 1.30 three years later than 0.85 before returning close to its initial value, but for how long?
So it can be used in the world requires that the euro is also offered. Must exist in sufficient quantities, and as it is the currency of the euro area, it must "sort" of the area, as is commonly said, in that it has to be transferred by residents to nonresidents. This can be done at the discretion of the transactions in the euro area with the rest of the world. It is necessary that the twelve countries considered together import more than it exports - is currently the contrary - or they pay more than they borrow. It is then necessary a net outflow of capital, that is precisely what is happening. Their situation vis-à-vis the rest of the world and is the exact opposite of the situation of the United States that import and borrowing. These international transactions that occur annually in the balance of payments are themselves subject to large variations. Not only the Twelve can export or pay more or less than one year to another, but they could also, some years later, importing more than it exports and therefore borrow ...
Finally, the euro can not see its international role only progress if the dollar declines. There can be no more euros in use worldwide if there is - at least relatively - less dollars. Such a substitution can not be done today by the market. And it may cause price fluctuations that central banks could certainly limit, provided to cooperate, the Maastricht Treaty opened this possibility (it is Article 111, one of the most important), but it remained a dead letter for now.
Ultimately, for over four years, the euro has fluctuated widely, and its use began to grow, but it still has little substituted the dollar. A report from the European Central Bank pub in December 2002 bound us that the use of euro banknotes outside the euro remains low: 8% to 50% against the U.S. dollar, the Euro holdings account for 13% of bank assets power, against 68% for the dollar, the international bond issues in euros are up to 30%, against 44% in dollars. And the ECB may conclude that, to date, the euro remains a regional currency against the dollar, whose use is "more massive and universal
by erectusplus at 5:28 AM |
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