Eurodollar We have seen that a collapse of a currency leads to major regional or even worldwide economic recession. Collapses in many East Asian countries, Russia, and the USA are the proof.

Eurodollar is one simple solution to the problems which currencies are causing the international economy. One option is that the euro could be merged with the dollar to create a eurodollar. The eurodollar would act as a single currency for both the United States and Europe. The eurodollar could possibly act as a single common currency for the rest of the world.

Eurodollar Benefits and Requirements

The introduction of a single currency the eurodollar for the United States and Europe would produce both economic benefits and economic costs, but the net economic benefits should on average exceed the costs.

Benefits of the eurodollar:

First, eurodollar, a single currency increases the transparency of prices.

Second, having a single currency, using the eurodollar, makes economic transactions easier than having a different currencies for the union.

Third, eurodollar reduces the transaction costs of buying and selling goods because people do not have to convert money from one currency to another.

Fourth, eurodollar would eliminate exchange rate risk among the countries that shared the eurodollar currency.

Fifth, using eurodollar, USA and Europe could no longer use devaluations as part of their economic policy to gain an advantage one over the other.

Sixth, because the Central Bank which would oversee the eurodollar union would not be controlled by a single government, it would be easier for the Central Bank to focus on its primary objective-to control prices and fight inflation.

Seventh, eurodollar would encourage international trade and reduce the disruptions that result from currency fluctuations.

Requirements for the eurodollar:

First, labor must be mobile. People should be able to move from an area suffering from recession to one that is enjoying an economic boom.

Second, eurodollar needs that wages and prices must be flexible.

Third, there must be some way of transferring resources to the country or region which is in dire economic straits in order to help it recover from its recession.

Fifth, countries muct be politically willing to adopt the eurodollar common currency.

Eurodollar timetable. The earliest date which the euro and the dollar could be linked together at a 1:1 ratio would be January 1, 2012.