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As we all know the dollar is weakening by the moment.But what if it is replaced as the global currency.I don’t think it will do you honestly think the world would want to use the euro?The U.S. is a nation of consumers.Do you think we are going to want to pay countries that we buy from with the euro?I don’t think we would want to be payed in euro’s either.Face it if the dollar does fall, i’m sure we americans will agree with our government on one thing.That is we don’t want to use the euro there is too much pride in the dollar.So we wouldn’t let if fall to the euro.Don’t know so much if our government would but thats a different story.Do you think the dollar will start a FULL recovery soon?Also if the U.S. economy collapses will the dollar do the same?Plus who should we trust more with the future of our nation Democrats or Republicans?

There would never be a point where we use euros for our everyday transactions. The US wouldn’t like it because it removes our control over our money supply, and the Europeans wouldn’t like it because it would tie their economy too closely to the US economy. Plus, the ECB has requirements for euro countries on budget deficits and national debt that we would most likely fail. We already do pay countries with the euro…when you buy a European product, the store (or its import firm) switches the dollars it got from you for euros to pay the European manufacturer. It works the opposite way for a European buying an American good. That’s just the way it works.

The major effect if the euro were to become the world’s reserve currency would be that it would increase the effective money supply, but if the Fed is paying good enough attention, they’ll take that extra money out of circulation to avoid inflation. The only other effect would be reputation-wise.

I don’t think the dollar will start a full recovery until we tackle the problem of our twin deficits. Right now we are just borrowing and borrowing, and other countries are beginning to think that we might not be able to repay it all. The weakening of the dollar has already helped our trade deficit by making our exports cheaper, but since it’s still so huge, it arguably needs to fall some more. Ultimately the cause of all of this is that we have very low national savings (basically private savings + taxes). In order to tackle this problem, we need to increase our savings rate, but since savings come at the expense of consumption, it could be painful.

If the US economy collapses, the dollar would as well.

“Trust” is a difficult word. They’re both politicians, so they listen to their special interests. They both have their flaws, but I’d put Obama over McCain, since he acknowledges that we have to raise our taxes to start to tackle our deficit, and he’s less likely to start another war. McCain says he’ll cut spending, but given that Congress does not like to do that, it’s easier to say than do.

This entry was posted on Thursday, July 31st, 2008 at 3:28 pm and is filed under Social Science. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.