Will dollar stay reserve currency?—Scott S. Powell – NYPOST.com

In late March, the China Development Bank agreed with its counterparts in Brazil, Russia, India and South Africa to eschew dollar lending and extend credit to each other in their own respective currencies.

With global demand for dollars falling, central banks around the world will inevitably reduce their dollar reserves. That selloff further weakens the dollar against other currencies and in turn drives up inflation.

All this comes as US federal debt is soaring, adding to concerns about the future value of that debt and of the dollar. It’s suddenly much easier to imagine a dollar collapse — which would be a highly unexpected occurrence, known as a “black swan” event. This would precipitate unprecedented disruption, because the dollar remains the world’s most important currency.

Let’s hope we can avert a global crisis triggered by reckless US government spending. What’s needed is new leadership in Washington with the courage to get our fiscal house in order and to defend the dollar against attack in a competitive global market.

via Will dollar stay reserve currency?—Scott S. Powell – NYPOST.com.

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