So long as the dollar retains its “reserve” status we’ll continue to run the world economic show.
The Europeans 13 years ago sought to launch a rival reserve currency in the euro, but after having a good go at it look to have failed, at least for now.
The rising Asian countries don’t like king dollar either. China would love to see the renmimbi become a reserve currency but the country and the currency are nowhere near ready for that. First it has to unwind from the greenback, and no one at this point knows how China will be able to do this without blowing itself up.
King dollar remains king, but the subjects are getting very restless.
The below article puts most of the blame for the increased international concern with the dollar at the foot of a dysfunctional American political system. But the truth is, though our international trade partners are indeed concerned that Congress and the President are lurching from political showdown to showdown, the real concern is whether the dollar system (beyond Congress and Washington DC) is more unsound than many realized.
But the possibility that it may generate yet another fiscal showdown as soon as January or February is on everyone’s minds. Last week a senior Chinese official called on the world to “de-Americanise”. Neither the Chinese renminbi nor the euro are in a position to supplant the US dollar, which still accounts for more than 60 per cent of global reserves. But governments and private investors are far more alert to possible alternatives than before. History is littered with solid objects – and riskless assets – that have melted into thin air.