Both dollar and the euro are top currencies. The dollar continues to dominate while the Euro is going through some troubles at the moment.
Both dollar and the euro are two of the top currencies today. Not too many can challenge the dominancy of these two currencies. So, it would be interesting to do a comparative study of these two leading currencies. There are similarities and differences.
As we all know, the Euro was created 11 years ago. Back then it was pitted against the dollar and many felt that the Euro could end the dominance of the dollar all over the world. But did that happen? Let’s examine. When we compare USA and Eurozone we can see that both have many similarities when it comes to population and economy. Moreover, similar institutions were governed by these two currencies. The dollar is being handled by the US Federal Reserve Bank (the Fed) and Euro by European Central Bank (ECB). Notably, both share federal structures. There is a central bank and then there are numerous regional and small banks under this. So, there are so many similarities to talk about here. As we stated before, the Dollar Continues to Dominate Even with the Entry of Yuan and you can learn more about that here.
Euro Financial Crisis
The euro is going through Euro Financial Crisis at the moment. So, Eurozone can learn a lot from the functioning of the U.S. dollar. Many European leaders have already commented on this. French President was the latest one to echo a similar sentiment recently. According to him, Eurozone might be in need of a unified fiscal policy. How did Americans manage to deal with the turbulence in the market over the decades? Well, in a closer inspection, you will understand uniform fiscal policies set by the federal government have helped the dollar to remain on top despite the crisis in the market.
Future of Euro
Yes, the future of the Euro is a hot topic among commentators. Well, according to them the US history could be a good indication for Euro as well. If we closely examine the path of a dollar, you will be able to trace the future of Euro as well, say experts. US government bought the debt of 13 states in 1970 to save a dollar. The EU has done the same as they have bought the bonds of member states. However, in 1840, the US government decided not to bailout 9 states that were on the brink of bankruptcy. The same can be applied in this scenario as well when the EU is dealing with a similar scenario at the moment with troubles member countries like Portugal, Ireland, Greece and Spain.
It’s Not an Equal Comparison
Yes, though we can draw comparisons between the histories of these two currencies, it would be foolish to blindly follow the path of the dollar. First and foremost, unlike 160 years ago, global markets are much more integrated today. Any decision that you take can have a ripple effect across the board. Whatever decision you take, you can expect a quick reaction from all quarters today. These days, a stupid comment from a politician can make markets volatile. The panic can quickly spread in scenarios like that. Moreover, the European banks have debts in many other countries. Therefore, euro can’t follow the path of the dollar in a blind manner. It will have to consider several things before it does something.