Are the US dollar’s days really numbered?

Some years ago, I attended a small luncheon on the outlook for the U.S. dollar. Paul Volcker, the former Federal Reserve chairman, was the guest of honor. In response to a chorus of Cassandras who argued that the U.S. economy’s all too apparent weaknesses would lead to an inevitable dollar collapse, Volcker made a simple observation: For the dollar to depreciate, he said, it would necessarily have to depreciate against another currency. And in Volcker’s view, at that time, the U.S. economy was fundamentally no weaker than that of any competing countries.

Volcker’s logic would seem equally pertinent today in responding to the many critics who believe that the Federal Reserve’s unprecedented quantitative easing policy will lead to the dollar’s imminent demise as a reserve currency. If the dollar is to lose its reserve status, as epitomized by the fact that more than 60 percent of the world’s foreign exchange and more than 85 percent of world trade is still denominated in U.S. dollars, some other currency would need to replace it. A close examination of the world’s other major currencies reveals that a currency is yet to emerge that offers the liquidity, depth of financial markets, and store of value that the U.S. dollar does.

Click here to read the entire article in The American.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Desmond
Lachman

What's new on AEI

With Ukraine, Putin is courting the home crowd
image Ayn Rand vs. Paul Ryan
image Fighting for us: The real stakes in Israel’s war
image Obama failed to stop the Islamic State when he had the chance
AEI on Facebook
Events Calendar
  • 28
    MON
  • 29
    TUE
  • 30
    WED
  • 31
    THU
  • 01
    FRI
Tuesday, July 29, 2014 | 10:00 a.m. – 12:00 p.m.
Is Medicare's future secure? The 2014 Trustees Report

Please join AEI as the chief actuary for Medicare summarizes the report’s results, followed by a panel discussion of what those spending trends are likely to mean for seniors, taxpayers, the health industry, and federal policy.

Friday, August 01, 2014 | 10:30 a.m. – 12:00 p.m.
Watergate revisited: The reforms and the reality, 40 years later

Please join us as four of Washington’s most distinguished political observers will revisit the Watergate hearings and discuss reforms that followed.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.