Friday, September 21, 2007

The World Changed Yesterday

By now most people know that yesterday, the Canadian dollar officially reached parity with the US dollar. While a nice little story, I'm not sure people appreciate the magnitude of this event. 20 years from now, I think we will look back on yesterday and mark it as the date that the euro offically overtook the US dollar as the world's reserve currency-of-choice. The UK's Daily Telegraph notes:

Saudi Arabia has refused to cut interest rates in lockstep with the US Federal
Reserve for the first time, signalling that the oil-rich Gulf kingdom is
preparing to break the dollar currency peg in a move that risks setting off a
stampede out of the dollar across the Middle East.

On an even more macro scale, however, it may be one of the first harbinger's of the end of American hegemony (RIP 1991-2007ish). See Krugman and The Big Picture.

1 comment:

Smaranda said...

I am sure as hell keeping my saved up Euro. First I moved to Europe when the Euro was 1.6 or so to the Canadian dollar, now I am moving to the States when the dollar is so freaking low. How does this happen???
Either way, I feel like something is really brooding here, hopefully (or not... I am not really sure what to think) something not too drastic in terms of world order. I think you should elaborate/speculate more on what it means if banks of the world drop the dollar as the reserve currency and the Euro takes over officially.