Dollar’s Days As Reserve Currency Could End As Early As 2015/16 – Here’s Why (+7K Views)

Barry Eichengreen, a professor at the University of California, Berkley, warned in a Financial Times commentary late last year that:

“If (US dollars) no longer offer the safety that investors have come to expect, they:

• will not function as the stable collateral required by bank funding markets,
• will not be regarded as an attractive form in which to hold international reserves and
• will not be seen as a convenient vehicle for merchandise transactions.”

Christopher Vecchio, currency analyst at DailyFX, a trading firm says that:

“Despite the increase in risk to the U.S. dollar and Treasury, investors still feel safest at home [but,] longer term, countries are going to diversify away from the dollar if they can. There are more favorable investment opportunities out there if you can catch yield.”

Michael Pento, president of Pento Portfolio Strategies maintains that:

“The No. 1 security issue we have as a nation is the preservation of the U.S. dollar as the world’s reserve currency [and I think it could] become a particularly salient issue by 2015, 2016….When we’re spending 30-50% of our revenue on debt service payments, we enter into a bond market crisis. The dollar starts to drop along with bond prices. That would set off the whole thing.”

The dollar’s seemingly precarious status is why Pento remains bullish on gold and believes the dollar’s demise as the premier reserve currency could end much sooner than Bove predicts.

[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.]

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