posted on Mar, 20 2006 @ 03:41 PM
let me give a little international economics 101. the currency in foreign countries isnt nearly as strong as the Euro the Yen and the Dollar. now say
for instance some country has lets say the peso. some one who wants to do a hostle take over of the currency could start buying it off. without
foreign currency the government cant buy back their currency. all in all that pretty much means the government would be screwed. THATS why right now
the US dollar is the current currency used for Central Banks. In cases of hostile take overs they need to be able to buy their money before the take
over is complete and they lose it all.
the reason the dollar is there in the first place is because of their monopoly of the oil trade. (coffee is the next highest trade to oil, but by a
far margin) anyway without that monopoly we will lose our dominance in the Central Banks to whatever currency takes its place(in this case the euro).
Mainly because if some one comes in and starts buying up pesos in euros, the dollar cannot compete with the euro since the euro has dominance over the
dollar. So these countries need whatever currency has the best value. the ONLY reason the euro has fully booted the dollar is the fact it has a tight
grip on oil, which they are seeming to lose now.
its not as much as the immediate effects that will damage us(they will none the less) but the long term effects of losing our super power currency.
this damage is a result of trade deficit which we will no longer be able to pay back. Once the euro takes hold countries will need to stock euros
instead of dollars because anyone that does a hostile take over in euros will outdo any government that tries to buy it back in dollars.
also to add to this, the governments with a low amount of foreign dominant currency such as south american nations have more hostile take overs
because they can't buy their currency back and lose their power from it. that answers why foreign countries need whatever money is the dominant
currency for reserves in the world.