Tuesday, March 31, 2009

Dump the US Dollar as the Worlds Reserve Currency

Chinese central bank governor, Zhou Xiaochuan suggested dumping the US dollar as the world’s reserve currency. This forced the United States President Barack Obama to defend the US dollar. US Treasury Secretary Timothy Geithner also defended the US dollar. It seems that US economic hegemony is coming under immense pressure from all directions.

The US dollar recorded its biggest weekly fall in 24 years. It lost almost 5.1 percent which is the biggest fall since 1985.

Former US Federal Reserve Chairman Alan Greenspan said that it is "absolutely conceivable that the euro will replace the dollar as reserve currency, or will be traded as an equally important reserve currency".

Geithner conceived he had not read Xiaochuan’s proposal but added that "as I understand it, it's a proposal designed to increase the use of the IMF's Special Drawing Rights. I am actually quite open to that suggestion … But you should think of it as rather evolutionary, building on the current architecture, than rather than moving us to global monetary union."

Obama was quick to defend US dollar. He said, “As far as confidence in the US economy or the dollar, I would just point out that the dollar is extraordinarily strong right now ... although we are going through a rough patch”.

Chinese central bank governor, Zhou Xiaochuan said, “The crisis again calls for creative reform of the existing international monetary system towards an international reserve currency with a stable value, rule-based issuance and manageable supply, so as to achieve the objective of safeguarding global economic and financial stability.”

It is evident that sooner or later the US dollar will be dumped as the reserve currency of the world. This will be among a growing list of setbacks facing the US government.