The long anticipated target of 160.00 Euro Dollars to the US Dollar was hit and briefly exceeded in forex trading today. That’s quite a long way from the par price that the Euro started trading against the US Dollar in 1999 and should be taken by US policy makers as a warning that all is not well with US policies on multiple fronts.

The Euro surged to above 160.00 after two governors of the ECU central bank stated that the EC may need to raise interest rates in order to keep inflation under control.

The euro was introduced to world financial markets as an accounting currency in 1999 and launched as physical coins and banknotes on 1 January 2002.

The Euro is the official currency of the European Union (EU), and is used in 15 member states, known collectively as the Eurozone. (Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, Spain).

It is also used in 9 other countries, 7 of those being in Europe. The Euro is the single currency for over 320 million Europeans. The Euro is used by nearly 500 million people worldwide. With more than €610 billion in circulation as of December 2006 the euro is the currency with the highest combined value of cash in circulation in the world, having surpassed the U.S. Dollar. Due to the Euro’s appreciation against the Dollar since 2006 this is more true today than ever.

The US Dollar continues to be under pressure against the Euro and almost every major currency as the aggressive lowering of interest rates by the US Federal Reserve Bank has increased interest rate differentials between the US Dollar and other currencies, especially the Euro.

The economy in Europe over all continues to do fairly well while the US economy is in a recession or something very close to one. Generally, investment funds will flow into a stable currency that offers higher interest rates thereby strengthening the currency.

As the largest debtor nation in the world the spend happy US has an undeclared policy of letting the Dollar slide. By depreciating the Dollar the US government is able to make fixed debt payments with ever cheaper Dollars thereby effectively stiffing its’ creditors and making it somewhat easier to service the huge and ever growing US debt.

The US is playing a very dangerous game. It is very close to losing the Dollar’s privileged status of being the world premier reserve currency. Should the worldwide holders of vast amounts of Dollars ever panic and decide to dump Dollars all about the same time the resulting Dollar free fall would destabilize commerce the world over and bring enormous pain to the people of the US as price increases reach a hyperinflation level.

It would be far better for the US to endure a recession now that to pursue policies that mat send the Dollar into free fall. The Euro trading above 160.00 is a clear warning to the US government that they are losing control of their own destiny.

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