Rory A asked in Social ScienceEconomics · 9 years ago

When will the US dollar will no longer be the world's reserve currency and what will be impact to US economy?

There is alot of grumbling about the US dollar weakness and US debt between world leaders and in the international press, When is it likely that they will pull the plug on the dollar as the world's reserve currency and how will it likely impact the US economy and long term way of life? Is total economic collapse a possibility? A likelihood? What can we do now to reduce the risk of that occuring or how to protect one's interests now (if it is a foregone conclusion). Thanks.

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  • pgreen
    Lv 6
    9 years ago
    Best Answer

    There is a growing distrust towards most existing major currencies,

    not just the US dollar.

    Under the pressure from many governments, and from business circles,

    to avoid a monetary chaos (we already had too many kinds of crises

    since 2007, so better avoiding to add a full fledged monetary one),

    steps towards a truly global reserve and reference currency will have

    to be taken in the immediate future to avoid a general monetary

    collapse.

    As gold is not fit for the task as its price is too volatile and as it entails

    a lot of constraints, this new standard will need to be built on the basis

    of a global cooperative governance.

    .

  • 9 years ago

    The Federal Reserve & Ben Bernanke are currently weakening the US dollar in an attempt to boost exports - which should help the USA climb out of its recession and increase employment. However, this has the effect of lowering the imports to the USA (which still helps the USA).

    The international community is complaining/grumbling because it is now more expensive to export their goods & services to the USA. So they cannot sell as much to the importing consumers of the international community.

    When will anyone "pull the plug?" ... who knows? Talk is cheap (supply exceeds demand! ;P )

    Economic collapse? Not likely for the USA since they don't rely heavily on international trade as other countries do (when I say that, I mean exports/imports are roughly 15% of GDP for the USA - so the US would feel it, but not outright collapse as opposed to it being something like 90%).

    It would probably help close the US's trade deficit, which would help the investment-savings gap, which can help US growth in the long run.

  • 9 years ago

    1. There is no reason to expect the dollar to be removed as the world's reserve currency in the foreseeable future.

    It is possible that the Euro would do it if the current crisis is handled well, but given recent history, that is not likely.

    The yuan can't be a reserve currency until China eliminates capital controls and grows much larger. The growth alone will take at least a decade under the most optimistic assumptions and in reality, probably two.

    2. There are advantages to the U.S. to having the dollar be the reserve currency, but it isn't clear that they are all that great:

    http://krugman.blogs.nytimes.com/2011/01/14/dollar...

    http://delong.typepad.com/sdj/2005/06/gourinchas_a...

    http://www.voxeu.org/index.php?q=node/4813

    http://www.j-bradford-delong.net/movable_type/2003...

    http://www.open-thinking.com/2010/07/recession-and...

    3. It just isn't worth worrying about. There are far more important problems to consider.

  • 3 years ago

    If it occurs the effect will rather be in accordance with what forex if any replaces it; I say if any because of the fact it could be achievable that a sparkling common forex must be designed yet which would be confusing so the different element could be to make it gold based and that should reason some considerable inflation finding on the futures paying for and promoting there. precise now i think of this is quite often talk over with shrink the U. S. spending/deficit which China and others have already expressed subject approximately. one in all those waut and notice what occurs then what the effect would be.

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