The euro could surpass the dollar within ten years
Tuesday, March 18, 2008
Listen to this article When we've said the greenback could lose its reserve currency status to the euro, the idea has often been met with derision. Yet we see evidence that international commercial transactions are moving away from dollar-based invoicing, a sign that the tectonic plates are shifting.
In a post at VoxEU, Jeff Frankel, a Serious Economist (and an American at that) discusses why the euro is a plausible replacement for the dollar as the main coin of international commerce. And Frankel cites a cause not often mentioned:loss of respect for the US as dominant military power. Frankel argues that the savings-rich countries who have benefitted from our armed presence, like Japan and the Gulf States, have seen buying our Treasuries as a fair deal in return to enjoying our protection. But the Bush Administration's unilateralism and recklessness (which have also been accompanied by unprecedented current account deficits, which increase the need for foreign capital greatly) have tried the patience of our creditors.
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