Euro Dollar taking over America?

Question

Businesses in New York (east coast) are allowing customers to pay in Euro Dollars. Will this spread accross the USA? What will be the outcome? Will Euro Dollar replace the US dollar? Why shouldnt it happen?Why should it happen?

Answer 1

With the Euro being worth more than the US dollar, businesses are thinking that they can profit more by accepting payment in Euros.

In other words, as the dollar continues to fall against the Euro, businesses being paid in Euros can exchange them for more and more dollars. So it makes economic sense for them to accept the Euro.

Now the problem here is that they're making an important assumption. The dollar will continue to fall against the Euro. If they guess right, then they might profit. But if they guess wrong, then they could loose, not win.

Currencies fluctuate on a daily basis, which is perfectly normal. And the US dollar is strong one moment, weak the next. Also nothing so unusual. The issues are how low the dollar will go and how long the dollar's slide will last. And these are unknown and subject to opinion.

Whether or not it will spread to other parts of the country, I cannot say. But there is a US pizza joint that was in the news a while ago that's accepting payment in Mexican Pesos because they have large number of Hispanic customers from Mexico. And they're located right near the boarder.

As to whether or not the Euro will replace the dollar as America's currency, I don't see that happening personally. Yes, the dollar's in the dumps, and has been for some time now. And yes, it may be there for a while longer.

But I don't see the dollar having a more permanent loss in value. Instead, I feel it's temporary and will eventually go back up again. Plus, there's a pride issue. I don't see the American consumer, businesses, or government officials clammering for giving up the dollar and switching to the Euro. The dollar, in my opinion, is thought of like the Bald Eagle, a symbol of American power and status.

Answer 2

I think businesses do this at the retail level to provide a convenience to their customers.  They can also often make a little money on the exchange rate, as compensation for dealing with the increased overhead of doing on the fly conversions etc.  

The link below cites a paper that concludes that if Europe can succeed in overtaking the dollar with the Euro as the international standard, a list of benefits will accrue that will boost their GDP about .5% and cause a corresponding drop in the US GDP.   So the US would be inclined to want to fight that if they can.

If the US gets its act together, and stops deficit spending at a dizzying rate, and makes better trade deals we could see our economic fortunes improve enough to stop any talk of a different international monitary standard in the shorter run.

In the long run, after Asia realizes its full potential, you would expect we will eventually want a world currency, but I'm not sure how that complicates the need for each country to have some measure of autonomy in regulating its own banking systems.

This is an excellent question.  I look forward to reading other responses.

http://www.cepr.org/press/EP26RPPR.htm

Answer 3

The same thing happened in the late 90s when a lot of European nations accepted U.S dollars because of its strength from travelers. The Euro cant replace the U.S dollar in America because this note is legal tender for all debts, public and private in the U.S. Also the U.S dollar is still the worlds reserve currency. Another point to make is that the U.S dollar is backed by oil, most of the worlds oil producing nations only accept U.S dollars, so this creates a lot demand for the dollar. I don't see the Euro taking over as the worlds reserve currency for another 20 years.

Answer 4

are they not the same? is not euro dollar just a US dollar deposited outside america? or do you mean EURO, the european currency?

Answer 5

if the euro proves to have a stable value it will take over as the leading currency in the world in a matter of months, not years.  a stable currency is the basis of a good economy