At present, approximately two thirds of world trade is conducted in dollars and two thirds of central banks' currency reserves are held in the American currency which remains the sole currency used by international institutions such as the International Monetary Fund. This confers on the US a major economic advantage: the ability to run a trade deficit year after year. US always spends more than it earns, whereas the rest of the world always earns more than it spends. A move away from the dollar towards the euro could have a disastrous effect on the US economy. A rapid and wholesale move to the euro might even lead to a dollar crash as everyone sought to get rid of some, or all, of their dollars at the same time. But that is an outcome that no one, not even France or Germany, is seeking because of the effect it would have on the world economy.
The strength of the dollar is closely related to the fact that oil, the most important commodity traded in the world, is priced in US currency. The majority of countries that are oil importers have to buy their oil in dollars, which forces them to keep most of their foreign currency in dollars. However that could change. Iran is planning to open a commodity exchange, often reffered to as the International Oil Bourse or the Iranian Oil Bourse, for the express purpose of trading oil, petrochemicals and gas in various non-dollar currencies, including euros. The opening date was initially planned for March 20, 2006, however the launch was delayed due to "technical glitches."
The European Union has steadily moved forward in its attempt to unite Europe politically and economically. It has succeeded in unifying and strengthening its economic market, creating a common currency, and establishing both a European legislative and judicial system. It has been suggested by some that the European Union may be the revived Roman Empire. Thus it is interesting to note that the introduction of the Euro is the first time since the days of Caesar and the Roman Empire that Europe has had a common currency, others have tried, most notably Napoleon Bonaparte, but none were successful.
Over the last few years we have watched closely as the European Union has emerged as a growing world power. In 2004 the EU welcomed 10 new member states, bringing the total number of member nations to 25. Bulgaria and Romania have signed accession treaties and are set to join the EU next year. Meanwhile, Turkey, Croatia, Macedonia, and several of the Balkan states have petitioned for membership.
We will continue to observe with anticipation the historic developments taking place in Europe. There are still many obstacles the European Union must face on the road to solidarity, but in the eyes of some they have already accomplished the impossible. The once impenetrable wall between east and west, communist and free, is now gone, and in its place is a growing economic and political force.
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