Sunday, January 1, 2012

Wildest currency prediction for the new year


In France, the European Central Bank's Christian Noyer defended the currency union, saying the euro could yet become the world's leading currency if leaders of the 17-nation bloc succeed in tightening fiscal integration.
"In 10 years, maybe the euro will be the world's number one currency," Noyer said in an article for Journal du Dimanche to mark the 10th anniversary of the launch of euro notes and coins. 

What is this central banker thinking? This could be the wildest prediction for the new year given what has happened in 2011 and the continued negative view toward the Euro. Could the Euro become a strong currency? Yes, but it will only happen if there is major restricting which may not include all of the current 17 countries in the monetary union. A more likely scenario is the ascent of the yuan. It is not clear that tightening of the fiscal union will solve the problem if there is not a major move to austerity. The union is not the problem. Spending is the problem.

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