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Forward Thinking
Reports of the dollar's demise may be premature - Despite losing 40 percent of its value versus the euro since 2002, the dollar still plays a role in 90 percent of all foreign exchange transactions. Oil, for example, is still priced in dollars. Continued use of the dollar as the world's reserve currency-the dominant monetary unit used in international transactions-eliminates transaction costs associated with converting one currency into another.
Euro expansion - Remember, only 15 of the 27 European Union member states use the euro; if the other 12 adopt the euro, the population of the euro-using area will soar to more than 495 million people. Some economists and commentators say the dollar will eventually lose its supremacy as the world's reserve currency. One such scenario foresees a world divided into trading blocs dominated by the dollar, the euro, and perhaps the Chinese yuan.
China's economic boom is just beginning - China is already the world's third-largest economy; its population of more than 1.3 billion people is nearly twice that of the U.S. and the EU combined. But China's gross domestic product per capita (its annual economic output divided by population) is still only $5,292, compared with $45,845 for the U.S. and $32,938 for the euro-using area, which leaves China with enormous potential for growth.
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