March 12, 2008: Nothing seems to stop the rise of the
euro in relation to the U.S. dollar.
With today's exchange rate at $1.55 to
1.00 €, the value of the euro reached another
all time high. The euro's strength is evident when seen in
relation to the currencies it replaced, especially the
German mark. The historic low of the dollar to the mark
was on April 19, 1995, when $1 was worth 1.36 DM. Today's
euro-dollar rate translates into a dollar-mark exchange
rate of $1 to 1.26 DM, which would have been unthinkable
during the Reagan presidency when the dollar was worth
more than 3 German marks at one point.
Another comparison would be to the euro's low point against
the dollar, which was in October 2000. One dollar then was
worth only 82 U.S. cents. Since then, the euro has appreciated
some 80 percent in relation to the dollar. Economists and
foreign exchange experts caution that the euro is overvalued.
That is no doubt true, but so was the dollar for years, and
that did not seem to worry people.
Just as remarkable as the euro's turnaround since 2000 is
the current view of former Federal Reserve chairman Alan
Prior to the euro's introduction, opponents
of the euro in Germany were quick to quote Greenspan as
one of their key "witnesses" on the folly of the new
currency. In an interview on May 2, 1997, Greenspan told
the "International Herald Tribune": "The euro will come,
but will not be sustainable." His prediction was plastered
on anti-euro posters and used in newspaper ads at the end
of the last millennium in a last-ditch effort to save the
Ten years later, it is obvious that Greenspan has changed
his mind, and not just because he no longer has a
responsibility to defend his country's currency. At the
beginning of 2007 the value of the dollar notes in circulation
was less than the value of euro notes, and the volume of foreign
currency reserves held in dollars was declining slowly in favor
of the euro. Last September Greenspan told the German magazine
"Stern" that the euro has the potential to replace the dollar
as the world's leading reserve currency. That's quite a
statement from a man who only ten years earlier had predicted
that the euro would not be sustainable.