Euro Gains as Reserve Choice
Alan Greenspan sees the Euro could replace the dollar as the reserve currency of choice on world markets. This AP report of an upcoming interview with the former chairman of the Federal Reserve indicates something felt by others.
This excerpt from my latest article mentions the possibility:
China holds more than $1 trillion. What would happen if China chose to dump those dollars on the world market? This would cause a devaluation of the dollar and loss of confidence in the U.S. economy. Of course, it is in China's short-term interest not to see the dollar devalued. They would lose their investment, and the resultant slump in the American economy would harm the Chinese economy. But it would be a mistake to think this could not change.
What if OPEC decided it would no longer price its oil in dollars but instead switched to the euro? Such a move would lead to higher fuel prices in the United States. There are those oil-producing countries that want to see this change. If confidence in the American economy took a serious hit, the movement toward such action could accelerate.
No matter how one looks at America's national economy, the fact is there is an enormous amount of debt - more than this, or future generations, can ever hope to repay. For now the country prints more paper with colored ink, calls them dollars and puts them out to creditors with the hope they will continue to have confidence in the American government and its economic policies. The day that changes will see Americans and many other nations paying a lot more for the basics of life we have come to take for granted.
