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Edited on Mon Jan-23-06 11:12 AM by ProfessorGAC
Shifts have occurred in the past as to the currency of choice in the past, (like pounds for oil to dollars for oil, or pounds for sugar to dollars for sugar or rice). In these cases, however, the switch was done following the shift of economic dominance. (The British Empire fell below the U.S. in this regard.) The shift of currency was an effect of the global dominance of a single macroeconomy. It was not a factor in the attainment of dominance. (A result, not a cause, iow.)
However, there is not one shred of data to suggest that a voluntary shift in the currency of choice affects the economy. These relationships are not bidirectional. EVery cause cannot be an effect and vice versa.
I'd be easier to convince if it had EVER happened before. But, there is no evidence in the last 150 years of mercantilism and capitalism to hint at this effect. Now, it's fair to say that if the EU really incorporate the U.K., and they get their continental act together in a truly united fashion, they could threaten the U.S. for global economic dominance. Then, the switch to the euro for oil could occur, but once again it would not be a cause of economic tectonics, but as a result of this seismic shift.
That's all i can tell you. There is nothing in mountains of data to support that currency leads an economy. But, there is a ton of evidence that currency follows the economic dominance.
And, once again: If geniuses like Wolfie, Perle, and Kristol believe it, i'm sure it's wrong.
Edited to address 2nd thought of yours: Sorry i forgot. There is a misconception of where these dollars go. If all oil were sold in euros, then we would have to buy in euros, IF we bought any from the middle east. (We already buy only a fraction of our oil from there.) But, in order to buy euros to pay for oil, we'd need to spend dollars at whatever market exchange rate exists. So, the dollars are still in circulation, the velocity remains unchanged, and just one extra layer of exchange, done with electrons on very fast computers, is created. There is no change in dollar volume, demand for dollars, or the value of each dollar. The misconception is rooted, i think, in the fact that the dollar is traded on open markets against other currency. But, it is intrinsically valueless. All that matters is the value of the commodity being purchased. Oil will still cost the same amount, no matter the currency. So, one small shift in the root by which those dollars are spent (instead of dollars = oil, it would be dollars = euros = oil) is transparent to the ultimate transaction. The Professor
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