Although the article says international bankers predict the dollar to lose its reserve status "in 25 years" i think there was a typo - the decimal was in the wrong place!
Other countries (perfect example being china) hold US dollar reserves because they sell more stuff to the US than they buy. Period. Economics 101.
So as long as they expect to keep being a net exporter to the US, the dollar will be a reserve currency.
Of course the dollar will eventually fall so much that US exporters (i.e. Boeing) become efficient enough to compete with anyone, even the chinese.
So all this talk about losing reserve status is close to meaningless IMO.
The perfect analogy to the world economy now is that of a big manufacturer (china) needing to sell to its biggest customers (europe and USA), but their customers are bankrupt.
So they have 2 choices: stop selling to them or finance them and continue to accept their paper.
Looks like China is firmly embracing option 2.
The day the US dollar stops being a reserve currency will be the start of the american manufacturing renaissance.
I'd love to see it, but it probably is 25 years away.
In 1988 people claimed Japan would become the #1 economy in the world in a decade, based on the same kind of simplistic thinking that the economy doing well at that moment will never, ever do anything wrong, and the US will never adapt.
Do you really think China's centrally planned economy is going to work in the long run? I don't.
It's not that china is doing anything right, they aren't, it's that the USA has done everything wrong, starting with GW Bush and accelerating with BO.
Dollar will lose reserve status this decade. Most probably before 2015. Even if it's still the reserve currency by then, it will definitely be devalued. Keep your eyes on China and the yuan. I think we will go completely bankrupt, dollar will collapse and then we'll start drilling into the trillions of barrels of oil that we have in this country. (Alaska, Colorado, North Dakota, Utah, Wyoming, Montana, Texas, etc.)
That will probably give us a strong currency again.
Stop and think about what the Fed clicking trillions of dollars into existence each year actually means- essentially, they can create these entities called dollars out of nowhere at zero cost to themselves, yet can then use them to purchase actual, tangible goods in the real world. These goods in the real world cost people time, energy, materials, labor, etc... in short, these goods have value. They are then able to be purchased using something which has, in essence, no value- or more precisely, which can be created in unlimited numbers for no cost. People around the world are not going to put up with this situation very long. Although at home we have legal tender laws forcing us to accept these "for all debts public and private" it won't be long until Brazil, China, Saudi Arabia, et al figure out that they have better options. They will most assuredly pursue those options, and sooner rather than later.
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