Dollar standards in the dollar era

摘要

The ECB and the euro provide an alternative to the FRB and the dollar. If Britain joined the euro area, the two areas by GDP would be about equal. However, most of international reserves today are held in dollars and implies a substantial overhang of dollars in the system relative to euros. That overhang is bound to have implications for the dollar-euro exchange rate, with a chronic tendency over the next few years for the euro to appreciate against the dollar. This overhang is not good news for Europe or the United States or the rest of the world. For the euro area, appreciation of the euro is bound to slow growth and weaken employment in the euro area and make it less competitive in the face of increasingly stiff competition from Asia. For the dollar area, it will mean a tendency for greater inflation risk than has appeared since the early 1970s.