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this concern is often dramatically overstated. Here’s why.
The following article is presented by Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and the FREE Market Intelligence Report newsletter (sample here) and has been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.
Roche goes on to say in further edited excerpts:
[As you can see in the table below,]… no one maintains reserve currency status forever [and] that shouldn’t be remotely surprising. The global economy is dynamic and market shares shift….[and] today nations accumulate reserves of U.S. dollars today because the U.S. economy is the dominant player in global trade.
(Source: DoubleLine)
Of course, the U.S. Dollar isn’t the only currency that nations maintain reserves of…but since the USA produces 22% of all world output it happens to play a particularly special role in the global economy. By virtue of being the largest economy in the world the accumulation of U.S. dollar denominated financial assets happens to dominate the global financial system. It’s sort of like being the top market share producer of a particular product in a particular industry. Other entities accumulate your products because you’re the top producer – and that changes over time. Market shares change and regimes shift with the evolving economy.
Conclusion
Will the USA lose its reserve currency status at some point?
Yes….
Will it cause everyone to suddenly ditch the dollar?
Probably not.
It just means the USA will produce a lower proportion of global output and therefore, as a matter of accounting, the rest of the world will hold a lower percentage of U.S. dollar denominated financial assets as a percentage of global output.
Will it be the end of the world?
No…
It’s just a sign that market shares change and when you’re #1, well, there’s only one direction to go.
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://pragcap.com/how-much-longer-will-the-dollar-remain-the-reserve-currency-of-the-world (Copyright © 2014 All Rights Reserved )
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I think the next World Currency will be a conglomeration of several currencies, which would make it far more stable and attractive to a much wider user base.
For example, Russia, India and China could co-sponsor the RIC!