How Much Longer Will the Dollar Remain the Reserve Currency of the World?

[timosman]

http://www.pragcap.com/how-much-long...-of-the-world/

The US Dollar’s status as a reserve currency seems to be a perennial concern for many people these days. I think this concern is often dramatically overstated. I was reminded of this point as I was reviewing the slides from Jeff Gundlach’s presentation yesterday which showed the following chart:



As you can see, no one maintains reserve currency status forever. That shouldn’t be remotely surprising. The global economy is dynamic and market shares shift. And at the end of the day that’s what reserve status is really all about. Think about it – nations accumulate reserves of US dollars today because the US economy is the dominant player in global trade.

Of course, the US Dollar isn’t the only currency that nations maintain reserves of. The Euro is also a major reserve currency and the Yuan is fast becoming a major reserve currency. 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 US 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.

So, will the USA lose its reserve currency status at some point? Yes. In fact, it’s already starting to lose its reserve status to Europe and China. Will it be the end of the world and 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 US dollar denominated financial assets as a percentage of global output. It’s not the end of the world. It’s just a sign that market shares change and when you’re #1, well, there’s only one direction to go.

[Ronin Truth]

Seems to all depend on who you ask and trust?

“It's tough to make predictions, especially about the future.” -- Yogi Berra

[FindLiberty]

ANSWER TO OP: 'till we run out of bombs

[Zippyjuan]

Will it be the end of the world and will it cause everyone to suddenly ditch the dollar? Probably not.

This. The Euro has too many issues to replace the dollar and the Yuan still has a long ways to go before it can challenge the dollar. Won't happen any time soon.

[r3volution 3.0]

With the US economy shrinking relative the world economy, and US monetary policy becoming increasingly erratic, it's only a matter of time.

But, as Zippy said, there are no viable alternatives at the moment, with Europe and China having political/economic issues of their own.

[oyarde]

I suggest everyone have a little bit of real money .

[r3volution 3.0]

I suggest everyone have a little bit of real money .

Yes, the dollar retaining its reserve currency status doesn't mean it will retain its value against goods and services in the US.

....it'll just depreciate less than it would absent the reserve currency status.

[staerker]

ANSWER TO OP: 'till we run out of bombs

Yep. I am beginning to come out of the mindset of an imminent economic apocalypse . Yes, the system should not be sustainable, but it is sustained by the bloodlust of this nation, which shows no sign of subsiding.

[DamianTV]

What ever the dollar is replaced with, odds are it will be pure digital. There several monetary battles going on right now. There is a war on cash, anonymity, and the value of many currencies. The US dollar only has some value due to being backed by oil, IE, the Petrol Dollar. But the rest of the world, except for most Americans, knows damn good and well this is a scam. I would place a few not too favorable bets on things like BRICs form of currency taking over, and that might happen around our next economic crash, which doesnt seem very far off.

[Ronin Truth]

The black markets worldwide will still accept gold and silver AKA money.

[DamianTV]

The black markets worldwide will still accept gold and silver AKA money.

Since we are turning into a full on Prison Planet where the US is a role model with 25% of the world's prison population, dont be surprised if other forms of currency come up. Just like in prison, cigarettes were used as currency, but today, its top ramen from what I hear...

[Ronin Truth]

Since we are turning into a full on Prison Planet where the US is a role model with 25% of the world's prison population, dont be surprised if other forms of currency come up. Just like in prison, cigarettes were used as currency, but today, its top ramen from what I hear...

Not talking US, just plain folks buying and selling.

[acptulsa]

...but today, its top ramen from what I hear...

Food has always been, and will always be, the ultimate reserve currency.

Only difference is, they have so screwed the economy that now food stamps are a huge percentage of the nation's wealth. Or, at the very least, EBT is a very significant portion of the wealth circulating in an overwhelming number of American neighborhoods.

[devil21]

Is it still the reserve currency? Perhaps it is still a reserve currency but since many countries are now bypassing the dollar for trade, it's pretty hard to call the dollar the reserve currency and keep a straight face.

Since we are turning into a full on Prison Planet where the US is a role model with 25% of the world's prison population, dont be surprised if other forms of currency come up. Just like in prison, cigarettes were used as currency, but today, its top ramen from what I hear...

Even the barter currencies are $#@!in' poison. Lots of MSG GMO neurotoxin in ramen powder...

[Zippyjuan]

Which currency has replaced the dollar as the #1 choice for reserve currency by countries? (yes- it is no the ONLY reserve currency)

[devil21]

Which currency has replaced the dollar as the #1 choice for reserve currency by countries? (yes- it is no the ONLY reserve currency)

Good question. Looks like a mix of currencies and commodities, which will eventually be ditched in favor of the pre-made SDR. "Hey, why bother with all of these domestic currencies and commodity trades when we already have this here SDR that accomplishes it already?" Of course it is planned that way. Create the problem, offer the solution. Saudis and Chinese dumping US debt recently is a big clue that the #1 status (which could only mean 50.01%...hardly making the dollar THE reserve currency, rather making it just barely the most widely used) is on the way out.

[TheTexan]

The US is and will continue to be the world's greatest superpower of all time, until the end of time.

God Bless America. Amen.

[Zippyjuan]

Good question. Looks like a mix of currencies and commodities, which will eventually be ditched in favor of the pre-made SDR. "Hey, why bother with all of these domestic currencies and commodity trades when we already have this here SDR that accomplishes it already?" Of course it is planned that way. Create the problem, offer the solution. Saudis and Chinese dumping US debt recently is a big clue that the #1 status (which could only mean 50.01%...hardly making the dollar THE reserve currency, rather making it just barely the most widely used) is on the way out.

There are about $300 billion worth of SDRs (which is not a currency and is 42% in dollars) in the entire world. It is not a reserve currency and no threat to the dollar as the main reserve currency. SDRs don't "accomplish that already" since they are not used in financial transactions. Saudi isn't dumping their Treasuries and China hasn't really dumped much of them either- China has only about $15 billion less than they did one year ago- still holding $1.24 trillion worth.

[devil21]

There are about $300 billion worth of SDRs (which is not a currency and is 42% in dollars) in the entire world. It is not a reserve currency and no threat to the dollar as the main reserve currency. SDRs don't "accomplish that already" since they are not used in financial transactions. Saudi isn't dumping their Treasuries and China hasn't really dumped much of them either- China has only about $15 billion less than they did one year ago- still holding $1.24 trillion worth.

I love it when Zippy only issues blanket denials, even when the denials are demonstrably false.

[Zippyjuan]

What is false in my post?

[devil21]

What is false in my post?

I could ask the same.

Or I could just post this:


and this:


Where does the second pic originate from, Zippy?

[Zippyjuan]

A magazine cover from 30 years ago (1988- and no further steps towards "one world currency" in that time" aside from the Euro which is showing that a global currency does not really work very well) is proof what I said was wrong?

Your painting is from a Norwegian painter Per Lasson Krohg who wanted to depict the world rising from the ashes of WWII. It is in the United Nations building in New York.

http://www.norway-un.org/NorwayandUN.../#.V0C8vZErKUk

‘The essence of the idea is to give an impression of light, security and joy. The world we see in the foreground is collapsing, while the new world based on based on clarity and harmony can be built up,’ explained Krogh himself in 1950, before adding;

‘Thus must the work of the UN and the Security Council provide the seeds for a new and more valuable life’.

As for SDR's: http://www.imf.org/external/np/exr/facts/sdr.htm

As of March 2016, 204.1 billion SDRs (equivalent to about $285 billion) had been created and allocated to members.

The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR serves as the unit of account of the IMF and some other international organizations.

The respective weights of the U.S. dollar, euro, Chinese renminbi, Japanese yen, and pound sterling are 41.73 percent, 30.93 percent, 10.92 percent, 8.33 percent, and 8.09 percent.1 These weights will be used to determine the amounts of each of the five currencies to be included in the new SDR valuation basket that will take effect on October 1, 2016.

Use of currencies as foreign reserves by percent:



http://www.forexblog.org/2011/05

Dollar has a long ways to go to lose its status as the #1 choice.

[LibForestPaul]

Federal Reserve Note,
Not US dollar...

I do not believe Federal Reserve will be going anyway, it is not American, and it has many invested in it who control numerous nation-states.