The euro continued to gain ground on the dollar in international official foreign exchange reserves in 2007, according to statistics just released by the International Monetary Fund (imf). That more and more states are investing their confidence in the euro, a relatively young and untested currency, rather than the U.S. dollar, is a significant trend in a global financial system largely underpinned and driven by confidence and perception.

According to statistics released by the imf, the euro’s share of known foreign exchange holdings rose to 26.4 percent in the third quarter of 2007, up from 25.5 percent in the previous three months and 24.4 percent in the third quarter of 2006. Meanwhile, the dollar’s share of known foreign exchange reserves for the third quarter of 2007 was 63.8 percent, down 2.7 percent from the third quarter in 2006.

“The euro’s rise will strengthen European policymakers’ conviction that the newer currency is maturing into a significant rival to the dollar,”reported the Financial Times (December 30; emphasis ours). In addition to the euro becoming the denomination of choice in foreign exchange markets, this past year “the value of euro notes in circulation exceeded the value of dollar bills, [and] the euro has also overtaken the dollar as the main denomination of international debt issues” (ibid.).

As people the world over increasingly perceive America’s dire economic condition, they are searching for a solid alternative in which to invest their confidence. Though there are still unknowns, it is becoming evident that Europe and the euro are emerging as the new center of gravity in the global economy.

In 2007, the European Union has shown signs that it could become the global economic powerhouse it has always sought to be. This trend looks set to continue, and as it does, watch for the merchants of the Earth to shift their confidence away from America and begin to invest it in Europe.

Such a radical shift will upend the American economy, which will drive other nations to invest in Europe all the more.

The U.S. is facing an economic calamity far worse than the stock market crash of 1929. The scale of this financial crisis will be unprecedented. To read a more lengthy explanation of this trend, read “New Global Trend: Dump a Dollar, Buy a Euro.”