While one prop keeping the US dollar strong is the fact that it is the reserve/oil currency of the world - the other prop is the fact that the world wants a strong dollar to maintain an advantageous exchange rate for exports. The Japanese are spending billions of dollars to do this. Without the US buying, the rest of the developed world would have no one to sell their goods to and go into serious depression.
I doubt that the relation dollar - gold is still valid. I agree that the world as such gets more trouble once the dollar gets too weak. nevertheless one must not forget that this recent rally came from dollar highs and not from average valuation against other currencies. We are still not at levels against the Euro we saw at Euro-start, and these levels did not make anyone nervous at that time. Too me the puzzeling thing is the speed and clarity of this trend. peace
I doubt a QUICK positive impact from the new countries, but finance is strongly based on projections. 10 years from now, Eastern Europe will be much much stronger. As you mentioned, Germany is actually an example of the potential Iron Curtained countries actually have. Eastern Germany had a lot of potential to tap into and accounted for a lot of Germany's productivity. The reasons I think the dollar is still going down are economy and doubt that US will succeed in their Iraq campaign. On the economic power side, the dollar is still overvalued due to the credit craze that has been going on for decades. On the oil side, what US is trying to do is probably one of the toughest campaigns ever. Personally I would not take a gamble on US or Euro currency. There is way too much uncertainty in Iraq regarding what the population really wants. It's obvious to us that Iraq could easily be a rich happy country, but it is not obvious to them at all. But I think US knows what they are doing.
Sorry I need to digress from the subject a bit. Yabz, what are you saying ? 'The world's sport is football.' Please make that 'The world's sport is soccer." freealways
Everyone outside the US calls soccer football... the point I was trying to make is that culturally and technologically the world follows the European rather than the US standard...doesn't this imply that the European currency will sooner or later become the reserve currency of the world?
No not at all. Do not forget that Europe's history and influence is about... oh... 100 times longer than USA's? Do not forget that USA culture has been able to make a tremendous mark on other countries in a very short period of time. Look at almost any country (besides the crazy fanatics and stone age) and you will find a significant US impact. For example, Moscow is very very Americanized and by choice. There is also some French culture influence, a little German but it's mostly American culture influence built upon Russian culture. Look at Japan as well. Hip Hop culture (which IS NOT just rap and R&B) is probably more vibrant there than here. Regarding the currency, USA economy, at the moment, is the strongest single nation economy by far. So dollar as a global currency is not going anywhere. But with the oil currency, one of the propositions I saw is that the Euro and the Dollar should be pegged and be practically interchangeable.
The EU accounts for about 31 percent of world output and 20 percent of world trade (excluding intra-EU transactions). The United States provides about 27 percent of global production and 18 percent of world trade. The dollar's share of world finance far exceeds the economic weight of the United States. In addition the EU is growing larger all the time. The US influence in the 20th century was enormous of course, but may have been artificially inflated by the 2 world wars. The cultural influence of Europe is not purely historical: the European GSM standard for mobile phones is recent and is adopted by most of the world. Aesthetically it must be said the dollar is far superior to the euro.