Opinions regarding the future of US dollar as World Reserve currency

[Russman]

Hi all,
I feel there are a lot of financially savvy individuals on this site.

Was wondering if anyone has opinions or thoughts regarding the future of the U.S. dollar as the World Reserve currency. Obviously, a contingent of other countries are trying to change that paradigm, to a single global currency (something other than the dollar). In effect, it would take away the dominance the U.S. has economically and possibly cripple it. If that were to happen, things could get very ugly for all of us who have investments, etc. and even everyday life in the U.S.

How realistic is this scenario, where the dollar gets abandoned for some other currency ? Obviously, anything is possible, but is it inevitable ?

Should I be worried, and should I hedge stock investments in the market and fixed cash with some amount of gold (which might be a good investment to have in case the dollar goes kaput, since historically whenever the dollar crashes, gold skyrockets).

I know I probably shouldn't be reading those doom and gloom (sky is falling) type articles...but they make you think about one scenario that's out there.

Thoughts ?

 

[Senator]

The USD will be the reserve currency for your and my lifetime. Rest assured, the USA prints money, although it is at a slower pace than the rest of the world.

China will NEVER be the developed worlds currency, as they manipulate their currency and do not allow it to fully float. You cannot buy baby formula without worrying about poisons, how is their currency to be trusted. And there are no checks and balances or transparency with their financial numbers.

Much of the USA's debt can be eliminate with a stroke of a pen. The entire social security'trust fund' can be wiped clean with no e effect. SS is a pay as you go system, and there are no true reserves, so the money that is ever paid back into the fund is new money anyway.

If you are really worried, buy BitCoins. And be subject to a whole host of other corruption issues.

 

[brewer12345]

If you think the dollar will crash, a cursory glance at other places where the local currency has imploded would suggest that a better investment than gold would be a stash of food and gold's close atomic cousin lead.

 

[Lsbcal]

...
Should I be worried, and should I hedge stock investments in the market and fixed cash with some amount of gold (which might be a good investment to have in case the dollar goes kaput, since historically whenever the dollar crashes, gold skyrockets).

Simple answer ... no.

I know I probably shouldn't be reading those doom and gloom (sky is falling) type articles...but they make you think about one scenario that's out there.

Thoughts ?

You know you shouldn't ... so don't.

Face it, nobody knows the future. The future is determined incrementally by day to day events involving billions of people and trillions of transactions.

 

[DrRoy]

The USD will be the reserve currency for your and my lifetime. Rest assured, the USA prints money, although it is at a slower pace than the rest of the world.

+1

 

[marko]

Everything Senator said.

 

[pjigar]

Reminds me of a movie dialog Timon says in one of the Lion King movies: "If not me then who? If not now then when?"

Let's define currency first: Currency = A promise to be "paid" a portion of goods or services or assets of an issuing entity.

There is no other viable currency in the world that can be trusted. Euro came close but we all know how Euro has turned out to be. My theory is that a currency needs backing of a singular government which is powerful (economically and militarily i.e. carrot and stick) and transparent. The sheer size of the economy also matters in order to have enough "shares" to go around to every currency holder. I don't see any nation coming even close to these parameters in a next century.

PS: Just to add to trust part: Holding currency is to hold

 

[HillCountry]

A major factor is about who will be dominating militarily. I see no change in 50 years.

 

[Lakewood90712]

An event or series of events to cause that would make your worry about the US Dollar not being the so called "World reserve currency" would be the least of anyone's problems in that situation .

A fellow who does finance as a hobby , Warren Buffet , has stated (paraphrase) " Everyone who has bet against the United States has always lost".

 

[NW-Bound]

This question first came up during the financial meltdown of 2009. Why does it come up now?

Back then, the US was pumping hundreds of billion of cash to rescue greedy and stupid banks, and S&P caused an outcry when it downgraded the credit rating of the US from AAA to AA+. I just checked, and this rating still holds.

 

[gretah]

OP - you are quite right to be concerned. The middle east along with China, Russia, and India have been moving in this direction for a long time. Witness BRICS system of banks.

Read The Colder War.
https://www.amazon.com/Colder-War-G...qid=1481595422&sr=8-1&keywords=the+colder+war

A quote from the page on Amazon
"There are few more important questions to the future of Western economies than the fate of the petrodollar and direction of the energy trade. Marin Katusa's book tells the story of raging battles in the least covered and most misunderstood war of our time, a war that is already starting to redraw the world's map. Marin is an intense individual and has structured mining and energy deals the world over. This book offers a perspective from the trenches in the high stakes world of energy security."

I've read the book twice. Very astute analysis of recent world ecumenic events.

btw - I completely disagree with Senator

 

[harley]

Reminds me of a movie dialog Timon says in one of the Lion King movies: "If not me then who? If not now then when?"

Lol! I guess it's good to get exposure to great thoughts, no matter where from. But Timon didn't even make the cut in the article. If Not Now, When? A Recent History of Hillel's Misattributed Maxim From Ivanka Trump to Ronald Reagan – Tablet Magazine

 

[Texas Proud]

Reminds me of a movie dialog Timon says in one of the Lion King movies: "If not me then who? If not now then when?"

Let's define currency first: Currency = A promise to be "paid" a portion of goods or services or assets of an issuing entity.

There is no other viable currency in the world that can be trusted. Euro came close but we all know how Euro has turned out to be. My theory is that a currency needs backing of a singular government which is powerful (economically and militarily i.e. carrot and stick) and transparent. The sheer size of the economy also matters in order to have enough "shares" to go around to every currency holder. I don't see any nation coming even close to these parameters in a next century.

PS: Just to add to trust part: Holding currency is to hold

This is kinda what I used to tell my boss when he went off on the dollar is going to heck in a hand basket....


I would always say.... what currency can take its place


One time he said Australia.... I had to laugh...

 

[Totoro]

One never knows, but with current trends continuing:

• USD importance as reserve currency will stay but diminish a bit
• Yuan may increase in importance
• The others will be stable or diminish as well (Euro, Yen, GBP, CAD)

Very maybe the INR could become somewhat relevant in 50 years or so.


Basically, just watch the IMF:
https://en.wikipedia.org/wiki/Special_drawing_rights


USD 42%, EUR 31%, Yuan 11%, Yen 8%, GBP 8%


My guess in 20 years would be around:
USD 38%, Yuan 20%, EUR 30%, Yen 5%, GBP 7%

 

[GravitySucks]

Eventually the dollar will be replaced. I just hope it doesn't happen in the next 40 years and it probably will take longer and happen slowly.
As Senator points out, who has the economic might and transparency to replace it? Wonder how the Russians and Chinese are feeling about the gas deal they signed not tied to USD now that the ruble tanked and the yuan has been devalued.
I have a friend who insists it will happen soon. He's been insisting so since I met him in 1989. Japanese, Russian, Saudis, now Chinese currencies so far have been on his radar.

 

[Texas Proud]

Eventually the dollar will be replaced. I just hope it doesn't happen in the next 40 years and it probably will take longer and happen slowly.
As Senator points out, who has the economic might and transparency to replace it? Wonder how the Russians and Chinese are feeling about the gas deal they signed not tied to USD now that the ruble tanked and the yuan has been devalued.
I have a friend who insists it will happen soon. He's been insisting so since I met him in 1989. Japanese, Russian, Saudis, now Chinese currencies so far have been on his radar.

Unless some major catastrophe occurs, it is not going to happen for many years... not in yours or my lifetime... heck, probably not in our children's lifetime.....


The US economy is easily the largest... China will surpass the US sometime in this century, but it has 10X number of people... it also is a dictatorship and does not care to follow the rules.. so, it it were you (even in 100 years) where would you want to put your trust in The USA or China?

No other country is large enough or growing fast enough to catch the US anytime soon...

The Euro is pretty large, but it has had zero traction on becoming the world reserve... and with the problems it has had over the last decade, I do not see it becoming one soon....

The next possibility is Japan... but it has been stagnant for 20+ years... but nobody seems to be talking about it becoming the world reserve currency...


Next up is India.... it is growing, but has more similarities to China than the US.... nope, not going there...

The next two are Brazil and Canada.... yea... right....



SOOOO, what currency is out there that can take the place that the US dollar has There isn't any.... and there isn't going to be one anytime soon...

Oh... btw, gold used to be available, but there just is not enough gold out there.... I looked it up and it is a bit more than $8 trillion... but the world GDP is over $70 trillion per year...

 

[Running_Man]

This question first came up during the financial meltdown of 2009. Why does it come up now?

Back then, the US was pumping hundreds of billion of cash to rescue greedy and stupid banks, and S&P caused an outcry when it downgraded the credit rating of the US from AAA to AA+. I just checked, and this rating still holds.

I think because since then the US government is expanding debt at 9 percent per year and the economy is only growing 2 percent per year. Eventually in anyone’s lifetime that rate of growth of debt to income is going to cause financial problems. Certainly appears US debt is going to increase for the next two years from the present rate based on likely spending and increases in interest payments. Growth is what is being counted on to increase and save the day, it’ll take a while to see if it is working.

 

[rayvt]

Unless some major catastrophe occurs, it is not going to happen for many years... not in yours or my lifetime... heck, probably not in our children's lifetime.....

It won't happen during the lifetime of your great-grandchildren's great-grandchildren.

It would have to be a major catastrophe, so major that the next reserve currency would be animal pelts.

 

[alaska55]

OP - you are quite right to be concerned. The middle east along with China, Russia, and India have been moving in this direction for a long time. Witness BRICS system of banks.

Read The Colder War.
https://www.amazon.com/Colder-War-G...qid=1481595422&sr=8-1&keywords=the+colder+war

A quote from the page on Amazon
"There are few more important questions to the future of Western economies than the fate of the petrodollar and direction of the energy trade. Marin Katusa's book tells the story of raging battles in the least covered and most misunderstood war of our time, a war that is already starting to redraw the world's map. Marin is an intense individual and has structured mining and energy deals the world over. This book offers a perspective from the trenches in the high stakes world of energy security."

I've read the book twice. Very astute analysis of recent world ecumenic events.

btw - I completely disagree with Senator

So you believe the yuan will be the reserve currency?

 

[harley]

This is kinda what I used to tell my boss when he went off on the dollar is going to heck in a hand basket....


I would always say.... what currency can take its place

Bitcoin! Or some later iteration of a nationless cryptocurrency, once it evolves to being even more secure.

 

[sengsational]

The people that post here have all got heavy bets on a stable financial system with the US in the lead. We bought into it and can't even think of the system leaving us hang out to dry. So if any other idea comes-up other than "it will be stable forever", the cognitive dissonance that arises is too much to bear, and the discussion goes to loading-up on food and ammo. There's a lot of room between something other than the stability we've enjoyed and food riots, but that middle ground never seems to be discussed.

 

[haha]

There's a lot of room between something other than the stability we've enjoyed and food riots, but that middle ground never seems to be discussed.

Because that is no fun at all!

Ha

 

[Texas Proud]

Bitcoin! Or some later iteration of a nationless cryptocurrency, once it evolves to being even more secure.

ROTFLOL!!!!!


Really.... not in our lifetimes...

Most people want a stable gvmt to back their money.... bitcoin is just a bet that some other fool will buy it at a higher price...




The chart of bitcoin to dollar does not show stability... cash is supposed to be a storage of value... not an investment... there is NO WAY I would want to be paid in bitcoins for anything... and I bet there are billions of people who would rather be paid in US dollars than bitcoin....


https://www.coinbase.com/charts?locale=en

 

[Texas Proud]

The people that post here have all got heavy bets on a stable financial system with the US in the lead. We bought into it and can't even think of the system leaving us hang out to dry. So if any other idea comes-up other than "it will be stable forever", the cognitive dissonance that arises is too much to bear, and the discussion goes to loading-up on food and ammo. There's a lot of room between something other than the stability we've enjoyed and food riots, but that middle ground never seems to be discussed.

I am not one of the people who say it will be stable forever.... but at this time there does not seem to be anything close to being able to take its place...


Here is a history of reserve currency though the ages.... the US dollar has only come to the forefront... using history as an example, we probably have a century or two before there will be anything else coming along...

If you note, the reserve currency is usually the leading military power at the time... since we are spending more than the next 7 countries combined I do not see anybody eclipsing us anytime soon....


Just sayin....

 

[Totoro]

The US economy is easily the largest... China will surpass the US sometime in this century, but it has 10X number of people... it also is a dictatorship and does not care to follow the rules..

Just a pedantic remark (sorry):

• Population US vs. China is roughly x4: 320 million vs. 1360 million
• The Chinese economy is already about the same size as the US: 21 trillion (PPP) vs. 19 trillion; in nominal terms 11 trillion vs. 19 trillion

At current growth rates with a modest reduction China will surpass the US within 10 years in nominal terms. Still means the average china person has a factor x4 to go (GDP per capita). That may never happen or take a very long time.


Not to downplay the US here, but things are changing and reasonably fast. Australia, New Zealand, Canada and Europe all see tangible things happening with the rise of China. From property prices to corporate takeover and tourism.