Economist David Wang said the dollar’s role as the world’s sole reserve currency isn’t in any danger.
Chinese, Russian, Indian, and Brazilian officials, speaking for the BRIC nations, have called for alternative reserve currencies in recent months.
That talk amounts to “sound and fury signifying not a whole lot," Wang told Bloggingstocks.com.
As for the BRIC nations, none of their central banks is independent enough from the government to guarantee their own currency’s strength, he said.
“If you do not have an independent central bank, it makes it very hard, if not impossible for a central bank to protect the value of money over time,” Wang said. “And if inflation is not contained, it is impossible to attain global reserve currency status."
China’s rants against the dollar are self-defeating, given its huge holdings of Treasury bonds and dollars themselves, Wang said.
"Beijing's stance was another example of hard Economics 101 lessons learned," he said.
"Frankly, it was a ridiculous stance, which they've since realized and are now slowly backing away from,’’ Wang said. “I mean, why would you talk down the dollar when you hold more than $1.2 trillion in dollar-denominated assets and reserves?”
That only cheapens the value of your own assets, Wang said.
As a result, the BRIC nation officials calls to lessen the dollar’s role have “little material implications” for the next five years because a weakened dollar isn’t in their “best interest,” Nick Chamie, head of emerging markets research at RBC Capital, wrote in a report cited by Bloomberg.
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