Greenspan Speaks! Says Euro Could Replace U.S. Dollar As Favoured Reserve Currency; War is for oil; and his thoughts on the next President
Former Fed chairman Alan Greenspan says its possible that the euro could replace the U.S. dollar as the reserve currency of choice.
According to an advance copy of an interview to be published in Thursday's edition of the German magazine Stern, Greenspan said that the dollar is still slightly ahead in its use as a reserve currency, but added that "it doesn't have all that much of an advantage" anymore.
The euro has been soaring against the U.S. currency in recent weeks, hitting all-time high of $1.3927 last week as the dollar has fallen on turbulent market conditions stemming from the ongoing U.S. subprime crisis. The Fed meets this week and is expected to lower its benchmark interest rate from the current 5.25%
Greenspan said that at the end of 2006, some 25% of all currency reserves held by central banks were held in euros, compared to 66% for the U.S. dollar.
In terms of being used as a payment for cross-border transactions, the euro is trailing the dollar only slightly with 39 to 43 %
Greenspan said the European Central Bank has become "a serious factor in the global economy."
He said the increased usage of the euro as a reserve currency has led to a lowering of interest rates in the euro zone, which has "without any doubt contributed to the current economic growth."
Greenspan also said that removal of Saddam Hussein had been "essential" to secure world oil supplies, a point he emphasized to the White House in private conversations before the 2003 invasion of Iraq.
Greenspan, who was the country's top voice on monetary policy at the time Bush decided to go to war in Iraq, has refrained from extensive public comment on it until now, but he made the striking comment in a new memoir out today that "the Iraq War is largely about oil." In the interview, he clarified that sentence in his 531-page book, saying that while securing global oil supplies was "not the administration's motive," he had presented the White House with the case for why removing Hussein was important for the global economy.
"I was not saying that that's the administration's motive," Greenspan said in an interview Saturday, "I'm just saying that if somebody asked me, 'Are we fortunate in taking out Saddam?' I would say it was essential."
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