Are teh Euros replacing Dollars?

Discussion in 'Community' started by mymemory, May 10, 2003.

  1. mymemory macrumors 68020

    mymemory

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    #1
    I'll be very carefull about talking about this issue.

    This information had been around for a few weeks (months), the posibility that the international comunity and specially the OPEC are swithching their mind and start to negociate with Euros, a currency that is gaining value, is stable and is getting very common.

    Here in my country only people that are traveling to the US are getting dollars, the rest are getting Euros while last year even to go to Spain we used to travel with $.

    Based on the information I got in the mail, the US may experience a very deep drepression specially because most of the $ are outside the country, specially in trading oil. Is the OPEC in this case start making deals in Euros there are gonna be a huge amount of $ without any use and that will produce a heavy devaluation of the currency. Just last week the Euro went from $1.09 to $1.15 (if I'm not wrong), that is about the increase of the Apple stocks.

    What do you think?

    I do not want to focus on the OPEC rather than in, what do you think the situation of the US will be in the future?
     
  2. mbustamante macrumors newbie

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    #2
    I've heard Rumors about England swiching but not the US. I reaily think though that it is doubtful for both countires. I mean, we've had the dollar since who knows how long, and the same with England. It would be confusing form some people to swich over, In my opioin as well.
     
  3. mymemory thread starter macrumors 68020

    mymemory

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    #3
    I do not mean to switch from $ to Euros in that way, I mean it as a standar way to measure the value of somthing. For example, in my country we calculate our deficit in dollars or if we are going to build a highway we meassure that in $, now, I'm in Venezuela (South America) and our coin is the Bolivar "Bs".

    Now, it is a interesting point that England is not accepting the Euros, there a lots of reasons to that, I would sugest that the main one is because of the royalty status and that tradition, and then because England is so close to the US in everything they do.
     
  4. evoluzione macrumors 68020

    evoluzione

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    #4
    the Euro is gaining strength, and will continue to do so, in every country, maybe more so in the black market than anywhere else. There is a 500euro note, which, with the current exchange rate, is close to a $600 bill. if you were running cash, what would you rather have? a suitcase full of $100 bills, or a small bag of 500euro notes?
    fortunately for America, there's a huge percentage of US bills circulating outside of the states, and the US Treasury releases reserve assets or something. (not too clued up on it but they pull a few strings to say the least).

    here it's nothing to worry about i'm sure, but everywhere, well, it's already in South America.....
     
  5. Mr. Anderson Moderator emeritus

    Mr. Anderson

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    #5
    That's acutally a pretty good question - and I think for a while still its going to stay dollars, but as you said, travelling to Europe now, you want to go with Euros.

    Long range trends are always tough to call - since the Euro is already an international currency, it has some appeal, obviously. As for bunkers full of US dollars, like the ones found in Iraq by US service men, well, I'm sure there are more out there. But unless they actually get traded in for Euros, I don't think that's going to make much difference.

    D
     
  6. evoluzione macrumors 68020

    evoluzione

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    #6
    The PM of England is Tony Blair, and he's a prize dick, I'm not sure who I detest more, him or Bush. I wouldn't be surprised if England went Euro sooner rather than later. Too much pressure from The United States of Europe. Having said that, Blair is Americanizing the UK, i notice it everytime I go home for a holiday. I hope we keep our British Pound, it's stronger than the Euro and the US Dollar, and has a LOT of tradition.
     
  7. Ugg macrumors 68000

    Ugg

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    #7
    The Pound has taken a major hit along with the USD against the Euro this year and the UK is having to go through a serious rethink of whether it will switch to the pound.

    Right now oil is priced in dollars. 2 years ago, Saddam started selling Iraqi oil in Euros instead of dollars, due to the huge drop in the dollar, Iraq earned $300 million more than he would have had they been sold in dollars.

    Many countries in the middle east are using the Euro as their currency of choice. It only makes sense since the majority of their non-oil trade is with the EU not with the US.

    With the anti-US backlash going on now and the lack of a favorable investment climate in the US, many foreign investors are switching to the European Central Bank. Interest rates are twice as high as from the US Federal Reserve and the overall EU economy is viewed as more stable in the long run.

    Right now, Norway is the country to watch as they are a major European oil producer, if they decide to adopt the Euro as their currency it is very likely that European oil trading will be done in Euros. Right now, with all oil trading done in dollars it provides the US with the right to print dollars without having to back them up.

    I think their will be a gradual shift of the world currency from dollars to Euros to the point where it is at least equal in its appeal to the USD. This of course is bad news for the US but, oh well.
     
  8. sparks9 macrumors 6502a

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    #8
    Woohoo Euros rule!

    World dominance for the Euro!

    Looking forward to Denmark getting Euros, last time the people rejected it :( But the danish krone is tied completely to the Euro, so it's following the Euro rate all the time.
     
  9. Knox Administrator

    Knox

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    #9
    To be honest i think the royalty status is a small part of it in comparison to the economic doubts. There's obviously going to be a bit of "you're not taking away *our* pound" but if people think they're going to be better off with the Euro i would imagine they'd change instantly.

    The European economy has traditionally been different to the UK (which is closer to the US in this respect). There are 3 main areas where Europe differs from the UK - house prices, consumer spending and the stock market. House prices in the UK tend to "boom and bust" quite frequently, with high variations in growth rates; consumer spending is a far greater part of the economy than in Europe and consumers in the UK borrow far more than those in Europe; and the stock market plays a far greater part of the economy in the UK.

    This is gradually changing with Europe getting closer to the UK, but the differences mean that the UK could be in a dramatically different economic climate from the rest of Europe, but we were in the Euro then we'd be tied to the same policies.

    I'd expect that the Euro and Dollar play an equal role for some time to come, maybe with the Euro gaining some more, but i'd think the Dollar would be an important currency for a while yet.

    PS England != UK, grrr :)
     
  10. mymemory thread starter macrumors 68020

    mymemory

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    #10
    The "oh,well" is my point!

    Look, if 1/3 or 90% of the oil producers start selling in euros the US is ****-up big time, because the US will have to buy euros to get oil, that mean that there is gonna be a overflow of dollars inside the US because no one are using them over seas. I mean, the oil industry!

    Just imagine if Apple have to pay the parts in Euros.

    Remember, the US economy is base on offer and demand, if the oil industry is not demanding dollars but euros and most of the countries of the world start saving in euros too... I can predict as well as most of the economist I had read that the US economy is going to fall very deep if everything goes this way.
     
  11. Ugg macrumors 68000

    Ugg

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    #11
    I agree wholeheartedly with what you have to say. The only exception to the above is that it is not in the world's best interests to see the US economy fail. It is, after all, the largest economy in the world and if it failed, a lot of other countries would fail along with it.

    I believe that it will be a very painful period for the US as it loses its financial power around the world. Ask the Brits what it was like at the end of the 1800s when their world dominance started to crumble.
     
  12. evoluzione macrumors 68020

    evoluzione

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    #12
    haha, you make it sound like we were alive way back then ;)

    you raised some good points earlier. it's very interesting to see things from a different point of view, it's difficult for me to get decent information over here, the U.S. media is awful, world coverage is so poorly represented, unles of course the U.S. is blowing it up. :rolleyes:
     
  13. Mr. Anderson Moderator emeritus

    Mr. Anderson

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    #13
    True - and remember when you add in the Yen to the equation you're talking about the world market economic structure. Its not a simple problem to understand or predict. All these values fluctuate regularly and all are related in some way to the others. If the dollar tanks and doesn't rebound, all others will follow.

    D
     
  14. pinks macrumors regular

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    #14
    I think there is a little bit of confusion about this use of US Dollars in the buying/selling of oil, etc.

    The large petroleum companies do not sell there respective products and receive payment in dollars, it is only valued in USD. Since the end of WW2 and, in particular, the US-led Bretton Woods agreement (a conference which created the IMF and the GATT) oil and gold have been 'valued' in dollars because dollars represented a "stable" currency (i.e. not significantly prone to inflationery pressures). This was done in an attempt to establish an internationally standardised value for these products - in turn rendering the Dollar as an international currency.

    Now, as the dollar experiences greater 'competition' from the Euro - which is not only the currency of the world's largest free-market area (the EU), but also the unofficial currency of an increasing number of countries (including "axis of evil" countries, like North Korea) - so the preceived stability of the Euro will increase at the expense of that of the USD. However, if international commodity markets were re-calibrated for Euros, the US would not have to buy Euros in order to buy oil: Euros would only be used as a new standardised value, with actual transactions taking place in any number of currencies.

    Finallly, enough talk of 'England' in isolation: Scotland, Wales and Northern Ireland along with England make up the UK :rolleyes: which, with any luck, will adopt the Euro before too long.

    Sorry for rambling.

    - pinks
     
  15. cc bcc macrumors 6502

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    nl
    #15
    I'm not really sure what the effect will be. Has Europe been suffering economically from having the USD as the leading trading currency? I guess not. Why would the US suffer if the Euro replaced the dollar as a trading currency?

    For practical reasons the Euro is very nice, at least for me. Holland is so small, it's hard not to go abroad every once in a while, and changing currency all the time is a pain.

    About the Pound having a long tradition, the same goes for the old dutch guilder. And also for the other euro-countries. It's weird the first couple of weeks, having to pay with a new currency. It's been two years and I'm still having trouble with the coins sometimes.
     
  16. zoetropeuk macrumors regular

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    #16
    I agree that OPEC member countries switching from the $USD to the ?EURO will indeed have an impact on the US economy as OIL IS TRADED IN $USD. Any country at the moment buying oil is forced to by $USD to buy that oil from OPEC.
    But this is not the biggest concern for the US at the moment. It is the fact that the reserve banks of the worlds largest economies who were once flush with $USDs are now switching across to the ?EURO.
    Take Australia for example. For every $AUD in circulation the Australian Federal Reserve bank has the equivalent $USD value. So everytime we print $1AUD we have to also buy $0.70USD and deposit it into the reserve bank, it is this principal that keeps a large sector of the US economy afloat as it falsely inflates the true value of the $USD.
    Now if OZ were to switch to the ?EURO to back our currency then it's a very similar scenario to any company losing a major account and the revenue stream that goes with it.
    This swing towards the ?EURO as a reserve currency has already started to take place, most members of the EU already have a 50-50 split of $USD|?EURO's.
    Another problem is the US ditching the gold standard. As it stands at the moment the US dollar has no real tangible value and has no substance behind it.
    This is a dilution of the facts from many papers, essays and reports that I have read on the subject. It is quite difficult to get a real grasp on the exact extent of the issues and problems surrounding them as there is a lot of conflicting opinions out there at the moment.
     
  17. mymemory thread starter macrumors 68020

    mymemory

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    #17
    Let me explain you, it is easier than you think.

    You have 3 Kilograms of gold that represent 6 bills of "bcc" currency. Now because you are a country that produces a lot of things and you want people to buy them overseas, you print 60 bcc so poeple have acces to them. Those bills are not represented by your gold, they are now represented by your products (ex: computers).

    The value of your bills are not based on gold anymore, now is by offer and demand of your products.

    Now, everybody has bcc bills in their bank accounts overseas but there is a new currency called "euros" that is supported by a gourp of countries. This currency is becoming very strong because each country has 2 kilograms of gold but they didn't created 60 bills as you did, they created 10 each country and there are about 7 countries = 70 euros.

    Now ¿which currency do you think has better support closer to gold relationship? ¿Which currecy has the bigger posibility to increase their ammount without stay really far from the gold value? the euro.

    But that is not the problem, the problem is that the people are gonna replace their savings from bcc's to euros because of that. Specially because the euro has a biger headroom and it is use in most ofv the european territory, so the advantages are good.

    Now, ¿what are you gonna do with so many bcc bill back in your contry? You used to have the same 6 bcc bills, now you have 66!

    And the worst is that now you have to buy euros to trade outside your country.

    For example Japan use to print lots of bills to devaluate the currency to make it cheap enough for every body to buy it. If your currency is expensive you will not be able to sell the product that you build. Now, that extra currency is to be outside your country.

    If you have too many things of one thing it loose value.

    So, a Powerbook that cost $2000 it can go up to $3000 and that means that you have to fix your entire industry, if you have savings of $6000 now you will be able to buy 2 powerbooks when you where able to buy 3 a month ago.

    That is what is happening in my country. The dollar was Bs. 4,30 15 years ago and now it is Bs. 2,200. Actually a year ago it was Bs. 700.

    A year ago I was making $1000 (Bs. 700), today I'm making Bs. 700 but that is only $318.

    So, the US will have to increase salaries, etc, etc.

    It is a big issue.

    Do you get it?
     
  18. zoetropeuk macrumors regular

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    #18
    I forgot to include my opinion's regarding the UK's reluctancy to switch to the ?euro.
    If the UK did in fact switch to the euro it would be hugely benficial for the population. At the moment it is way too easy for both UK based companies and international companies to overcharge us for exactly the same products.

    eg here in the UK we pay $USD4610 for:

    17"PB 1gb 60gb superdrive model.

    You lucky folks in the US pay $USD3600 for what we pay you can get:

    17"PB 1gb 60gb superdrive model PLUS
    17" Studio display PLUS
    a brand spanking new 10gb IPOD.

    Now how fair is that ?? OR I could fly to New York for the weekend, go to the SOHO Apple store, purchase my 17"PB and fly home for the same $USD4600.

    Now the changes won't happen top-down eg large purchases such as cars and computers, immediately. But it will effect smaller purchases faster. Who will pay 5 euros for a coffee in oxford when the exact same coffee costs 1.5 euros in Italy for example. Having the same currency to DIRECTLY COMPARE prices will be a huge mind ***k for UK dwellers.

    As smaller items move in line to their EU conterparts the SME's will have less revenue and salaries will have to be cut. Therefore consumer spending will plumet, and the only way to readjust this imbalance will be to reduce prices on more of the major purchases.

    This will also have an effect on countries outside the UK, such as the US as companies like Apple would increase domestics prices to compensate for lost UK revenue. And us poor brits will finally stop subsidising everyone else.

    Hope that all makes sense.
     
  19. Les Kern macrumors 68040

    Les Kern

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    #19
    Re: Are teh Euros replacing Dollars?

    Without letting too much politics creep in, the future, I think is the Euro will eventually win. A stable coalition of the truly willing, backed a huge economy, by some of the best workers in the world. The U.S.? Declining....by the time Bush is done dollars against the Euro will be a joke. Look at the trend as of late. Look at what we're doing to them, or at least trying to do.
     
  20. uhlawboi80 macrumors 6502

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    #20
    no offense, but the dollar isnt going anywhere. And from what i just read, OPEC is now trading with all the countries that use Euros, in Euros and some smaller european countries so they dotn have to deal with so many types of currency. If you really think OPEC is going to demand the US, who consumes about 1/3 of the worlds oil, in Euros you are just delusional
     
  21. Ugg macrumors 68000

    Ugg

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    #21
    No, I don't think that will happen but if OPEC decides to sell the other 2/3 of its oil in Euros, then there will be that much less need for dollars.

    The underlying problem is that the US is buying too much from abroad and not selling enough abroad. Therefore the trade imbalance is the biggest worry. Since we have exported a phenomenal amount of manufacturing jobs in the last 20 or so years, we're in deep doodoo. Especially if inflation hits because all imports cost 20-30% more because of the current administration's belief that a weak dollar is the way to go.

    I think this is another one of those slippery slopes...
     
  22. Foxer macrumors 65816

    Foxer

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    #22
    Didn't you all read Pink's response above? Oil isn't traded in dollars, per se. We just value it IN TERMS OF DOLLARS so that everyone in the world knows what the price is relative to yesterday. The market sets the value of a barrell in dollars, but you can pay in any currency you wish. For example, if a barrel is US$30, you can buy that barrel in any currency you want, so long as you give them US$30 worth of that currency. If the international markets decided to start reporting prices in Pounds, or Euros or Thai Bhat it wouldn't make a dime's worth of difference, aside from potential symbolism. I worked in one of those OPEC nations for several years on this sort of stuff, trust me on the mechanics.

    Anyway, it's all electronically transferred nowadays. No actual currency is ever changed hands.

    As far as the Euro becoming the international currency of choice, who knows? The dollar is low against the Euro because our interest rates are so low. Two years ago there was open concern about the Euro being a "failue" because it was below the 1:1 ratio with the dollar. There are many, many European egos who want the 1 Euro to be worth more than 1 dollar. Such attempts to manipulate monetary markets are stupid, silly and, in the end, impossible.

    Will the dollar lose international cache at the hands of the Euro? I doubt it. I don't see it as a win-lose scenario. The world can suport more than one hard currency. It has done so before. It will also allow the softer, "basket" currencies that back their notes with foreign, hard, currencies to diversify their risks.

    International economics and commodity markets are fun, people!
     
  23. cc bcc macrumors 6502

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    nl
    #23
    Tnx mymemory for the explanation :) I never seem to understand the logic in economics. For me, there is none.

    Offtopic:
    I want to go to venezuela. I almost got to spend some bcc's in your country when I was in ecuador, but I desided to go down to peru instead of up to colombia and then into venezuela (I ran out of time). At another time I was in suriname, but the connection over land through guyana is very difficult I found out, flying was not an option (I ran out of bcc's).

    I will get there one day! :)
     
  24. zoetropeuk macrumors regular

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    #24
    The OIL BILL IS TRADED IN US DOLLARS ! Check out this link on the OPEC website:
    http://www.opec.org/NewsInfo/Speeches/sp2002/spAraqueSpainApr14.htm

    Up until last year OPEC member countries HAD TO USE US DOLLARS to purchase oil. Countries had to buy US dollars on the open market and then use those US DOLLARS to purchase the OIL.

    It's just like coming to the UK from the US, you have to use your USD's to buy GBP's, then you can use those GBP's to buy stuff, simple hey !

    So in fact OIL is traded, per se in the good ole' greenback after all.

    I know if I was in the US at the moment I'd be concerned. It looks like the US is slowly losing its stranglehold on the rest of the world and apart from military action I don't think that there's much that can be done about it. Go the EURO.
     
  25. pinks macrumors regular

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    #25
    Here is an excellent article relating to this issue.

    It shows that oil is, in fact, near-universally traded in dollars and not only valued in the currency. The side-effect of this is to totally contradict my earlier post and I apologise for the inaccuracy of the information that the post contains. In my defence, the original intention of the 'Dollar-standard' was the provision of a 'universal' value and not a global trading currency: this was a later side-effect of the Dollar's international exposure and stability.

    - pinks

    (hanging my head in shame)
     

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