Economist and forecaster Harry S Dent has predicted that over the next twenty years, the US dollar will lose its power as the world's reserve currency. He reckons the the premier currency in Asia will have a leading reserve function to sit along side the US dollar and Euro by 2030.
With the US stuck in recession, we are already seeing the first moves around this are now being taken with Kazakhstan's President Nursultan Nazarbayev saying that having the US dollar as the World's only reserve currency is illegal and that we need a new world currency. Russia's prime minister Vladimir Putin concurs.
Now the Financial Times reports that the governor of China's central bank, Zhou Xiaochuan, has come out calling for the dollar to be replaced with a new global reserve currency controlled by the International Monetary Fund. China's problem is that it's now backing what's left of the US economy by buying up US debt. As the economy sinks, it will weaken the dollar which would erode the value of its assets.
Still, it's not going to happen overnight. As Andrew Batson from The Wall Street Journal writes, nothing is going to change in the short term because central banks around the world hold more U.S. dollars and dollar securities than they do assets denominated in any other individual foreign currency. Still, the fact that China and other nations have gone on the offensive when the US is weaker economically might well reshape the future of the dollar. Just another development that might make Dent's prediction come true.
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