A recent comment by former U.S. Federal Reserve chairman Allan Greenspan that the Euro may one day replace the U.S. Dollar as the “reserve currency of choice” makes people wonder where the ‘greenback’ is heading. At present, the dollar is falling sharply against the European currency with the Euro reaching an all time high recently of $1.3925.
Israelis have always had a love affair with the Dollar; and for years virtually all real estate transactions were pegged to this currency, including rentals. Even many insurance policies were ‘linked’ to the Dollar; as well as salaries, savings schemes, and other important financial transactions.
This may all be changing, however, as the greenback continues to travel “south” against the ever strengthening Euro. It must be remembered that the EU represents a number of European economies, including ‘softer’ ones like Greece, Portugal, and recent new EU members from the former Eastern European “Commicon” countries such as Poland, Hungary, and Bulgaria.
With all this in mind, including America’s massive national debt and balance of payments deficit, it’s no wonder that the ‘pristine Europeans’ who spend virtually little on national defense, are able to bask in the glory of their “wonderful economies”.
Everything seems wonderful, until you consider some very important reasons for this discrepancy between the two currencies. For one thing, except from some token forces, the Europeans seem content to sit back and let America be the “policeman of the world”. EU member economies often do not indicate the true situation in these countries; as many of them have high rates of unemployment and many people virtually living on the dole. By importing “guest workers” from Turkey, the Balkans, North Africa and southern Asia, European industries and service businesses are propped up by lower paid foreign workers; and what is not taken care of in this manner is done by ‘outsourcing’ to India and China. While countries like Germany still have a problem selling their higher priced cars to Americans, they have offset this by opening assembly plants in the U.S. New markets for high-line German autos like Audis, BMW’s and Mercedes Benz have been found in China and other Asian countries, where assembly plants have been opened as well.
And from a financial aspect, the Europeans do not seem to have a problem with criminal and terrorist organizations like the Russian Mafia and Al Qaeda “laundering” their illicit incomes, including “blood diamonds” in European financial institutions. The downside of this influx of illicit capital comes in the form of increased control by criminal and terrorist elements, as well as the encroaching “Islamization” of Western Europe; especially in France, Germany and the Netherlands, and even in the U.K.
Gt. Britain still uses the Pound Sterling as its official currency, even though it is a full EU member; and the “Quid” is now hovering at the $2 level. For this reason, Israeli currency dealers are continually favoring the Pound and the Euro over the greenback in regards to people wanting to buy foreign currency when traveling to EU countries.
Despite everything, however, people shouldn’t write off the Dollar as the US economy is still on the most admired, and America is still the destination of choice of many people who want to share in the American Dream. So in this respect, Mr. Greenspan’s comments may be a bit pre-mature; and it can be for certain that it will be a while before the “Great Mosque of New York City” will be built anytime soon.
Can the same be said for London, Paris, Amsterdam or Berlin?
October 2, 2007 at 2:04 am
Are you kidding me? The Euro is overly inflated! At least the dollar, Yen, Pound, etc. represent their current values accurately.
Much of Europe is currently going through a “job recession,” with problems galore in many parts of the continent.
It may take two years or ten, but the Euro will probably crash if they their economy doesn’t catch up to its assumed value.
January 16, 2008 at 12:52 am
Darnell, you couldnt of hit it better on the nose with that one. I have many family members living throughout europe and they have all had to travel outside of there own countries where they live to find decent work. The job market in europe is as horrible as it get, and you cannot trust a market such as that, tough job markets spell trouble for any dollar.
I do agree the euro is over inflated and one day the shoe will fit on the other foot. The united states hold a strong and positive market, and even though it obviosly has it’s up’s and downs as it did today, it will most likely see brighter days to come.
lets hope for the best..