the future of global currency; the euro versus the dollar (2011)

[...]... for the EU since its creation “It is a question of survival,” she said The euro is in danger If the euro fails, then Europe fails.” Never had Europe’s money looked less like a contender for global status As this book went to press in mid-2010, the fate of the euro seemed to be hanging in the balance My own view, which I have often expressed to my students and others, is that over the long term the euro. .. circulation of currencies was not only accepted but widespread and commonplace The notion of absolute monetary sovereignty began to emerge only in the nineteenth century, with the formal consolidation of the powers of nation-states in Europe and elsewhere, and reached its apogee only in the middle of the twentieth century Since then, the tide has clearly reversed— all part of the broadening globalization of the. .. currency, the euro is unlikely to break through the ceiling that it reached after its first few years Parity with the dollar will not be attained The reasons for my judgment are spelled out in the essays collected together in the pages of this volume .The essays in this book, all but one written during the lifetime of the euro, divide into three groups The two essays in Part I set the stage, describing the. .. had to worry about the risk of exchange-rate disturbances in their corner of the world In place of distinct national currencies, each vulnerable to the dangers of market speculation, they could all enjoy the equivalent of irrevocably fixed exchange rates with their neighbors the hardest of “hard” pegs On the broader world stage, however, accomplishments have been rather more modest The dollar s status... how the creation of the euro has affected the power of participating states to cope with external challenges Overall, the essay suggests, EMU has signally failed to enhance the group’s autonomy or influence in monetary affairs Despite the elimination of any risk of exchangerate disturbances within the euro zone, members remain vulnerable to fluctuations of the euro vis-à-vis outside currencies; and, as the. .. term, an emergent Chinese yuan The essay accepts that the global position of the greenback may be weakening under the burden of America’s external deficits and looming foreign debt The dollar can never be as dominant as it once was But neither is there any obvious new leader lurking in the wings, just waiting to take center stage The weaknesses of the euro are by now obvious Other potential challengers... the road following the stalled challenge of the euro Chapter 1, published in the millennium year of 2000, takes a broad perspective on the monetary system as a whole, laying out long-term prospects for global currencies in the twenty-first century Particular emphasis is placed on what I call the Big Three the dollar, euro, and Japanese yen the three most widely used monies of their day The essay explores... moneys as the bezant and silver peso long after the decline of the imperial powers that first coined them It has also been evident more recently in the continued popularity of the dollar despite periodic bouts of exchange-rate depreciation Such inertia seems very much the rule, not the exception, in currency relations 14 The global currency system Inertia is promoted by two factors The first is the preexistence... among the Big Three At the top of the Currency Pyramid, the dollar today reigns supreme But might that change? Could the dollar s market leadership be challenged anytime soon by either the euro or the yen? Less probability may be attached to a successful challenge by the yen than by the euro, despite Japan’s evident strengths as the world’s top creditor nation and its enviable record of success in controlling... and other EMU currencies in foreign trade and investment The only question is how high the euro will rise and how much business it will take from the dollar As with the yen, the answer rests first and foremost on prospective developments in financial markets Even with the euro s promise of broad economies of scale and stable purchasing power, the dollar will be favored by the natural advantages of incumbency . 97 8-0 -4 1 5-7 814 9-7 (hbk) ISBN: 97 8-0 -4 1 5-7 815 0-3 (pbk) ISBN: 97 8-0 -2 0 3-8 338 0-3 (ebk) This edition published in the Taylor & Francis e-Library, 2010. To purchase your own copy of this or any of. laureate Robert Mundell, often hailed as the father of the euro, who boldly asserted that Europe’s money “will challenge the status of the dollar and alter the power configuration of the system.” As Mundell’s.