STAFF NEWS & ANALYSIS
More Damage: Euro Tumbles as Reserve Currency
By Staff News & Analysis - April 03, 2013

Developing World: Euro Loses Attraction as Reserve Currency … Countries in the developing world are drastically reducing their euro holdings as economic instability in Europe leads them elsewhere to stock their currency reserves. Euro holdings are at their lowest level in a decade, according to the International Monetary Fund. When the euro was first launched on Jan. 1, 1999, there were hopes in Europe that it might soon rival the US dollar as the world's premier reserve currency. And initially, it seemed that dream was not unrealistic, as countries around the world began filling their coffers with the European common currency. … [Now] countries are beginning to look elsewhere for their reserve currency needs –and have spent the last year and a half shedding euros. − Der Spiegel

Dominant Social Theme: The euro is eroding.

Free-Market Analysis: In our continued effort to explain why the shift from East to West is not entirely coincidental, we bring you this report from Der Spiegel. It continues, generally, with the dominant social theme (already identified in these pages) of Asian might, and in particular, increasing Chinese dominance via the yuan.

A continued torrent of articles and news from numerous sources charts this shift in gravity. And thus, one can conclude that all of this is necessary and unavoidable. Or maybe not …

The formation of an alternative IMF supported by the BRICs and bilateral trade agreements to use the yuan seem to be aimed at Anglo hegemony but we think it is more complicated than that.

Those who believe that China's ascension is an inescapable evolution are not dealing with the salient fact that EU leaders are on record long ago as requiring a European crisis to generate a deeper political union.

Statements have also been made regarding how East and West need to be on a level playing field if globalist ambitions are to be satisfied. Here is more from Der Spiegel:

… The latest installment of the regular International Monetary Fund report on currency reserves held by countries around the world [shows] developing economies shed some $45 billion worth of euros in 2012 and have sold close to $90 billion worth of euros since the second quarter of 2011.

The numbers seem to indicate that the ongoing euro crisis, fueled by high sovereign debt loads in several countries belonging to the common currency union, has eroded global confidence in the euro. During the same period, US dollar holdings among developing economies have continued to rise …

The IMF report indicates that the recent downturn in euro holdings marks a break following more than a decade of growth among developing nations. They now hold just a quarter of their foreign currency reserves in euros, a drop from 31 percent in 2009 and the lowest level in a decade, according to the Financial Times.

The euro's diminishing attraction as a reserve currency is almost certainly a function of the bloc's recent instability. Holdings in US dollars among developing nations likewise dropped in the third quarter of 2011 following the crisis over the debt ceiling and the subsequent Standard & Poor's downgrade of US debt, though the dollar quickly recovered.

We can see from this report that dollar confidence is affected, too, and the article goes on to mention that "of particular concern for the euro zone is its stagnant economy, a situation that isn't likely to improve soon, with several countries struggling due to tight austerity programs."

Note, please, the reference to austerity. This IMF "austerity" regime raises taxes and expands regulation while slashing spending for social programs – a recipe for social instability. Wherever you look when it comes to these crises – from excessive money printing to dysfunctional austerity programs – the reality is that those at the top could not generate more destabilizing solutions if they tried.

After Thoughts

The question is, why? See previous articles for our answer.

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