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What the Euro Will Look Like in Five Years

Believe it or not, there was a time when investors saw the euro as the savior currency of the world.

People talked about how the euro would replace the dollar as the world's reserve currency - and there was plenty of proof to support that opinion.

At the time, t he European Central Bank (ECB) had the right monetary solutions in place to fight inflation, while the U.S. Federal Reserve was struggling to keep inflation under control . That was another point for the euro, and a strike for the dollar.

So not surprisingly, central banks started replacing some of their U.S. dollar reserves with euros, and the euro became a second "reserve currency" for central banks.

The euro also soared past the dollar in just a few years. In fact, the euro shot up from 82 cents at its inception to $1.60 in less than 10 years.

Yes, it seemed that the planets were aligned for the euro to step up to the plate and become the world's reserve currency.

But that's because the euro had never experienced a real "rough patch," or serious monetary crisis.

Fast forward to 2008.

The Euro Gets its First Test

Once the credit crisis was in full bloom in mid-2008, loans dried up and unemployment went to 10% in the United States and Eurozone.

That's when the euro had its first real test.

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