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Cortes: Bin Laden Death Means Dollar to Remain as Reserve Currency

Thursday, 05 May 2011 09:28 AM

The death of terrorist mastermind Osama bin Laden means the U.S. military is quick and powerful and can do what it wants. It also means that since the U.S. military is that unrivaled, then the dollar will stick around as the world's only reserve currency.

"History shows us that the country with the strongest military is always the reserve currency," Steve Cortes, founder of the Veracruz market-research firm, tells CNBC.

"I think the ability of those heroes, of SEAL Team 6, to project power globally shows us that U.S. military is uncontested in its dominance, and I think the currency will re-assert accordingly."

Nevertheless, gaping U.S. deficits has others worried about the fate of the dollar, especially those in Brazil, Russia, India and China, the so-called BRIC economies.

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Osama bin Laden's death increased newspaper demand.
(Getty Images photo)
Some say the International Monetary Fund's currency unit, the Special Drawing Right (SDR), should replace the dollar as the world's reserve currency, or at least share the role with the greenback.

Special Drawing Rights are claims to different currencies, for example, a country can draw down from an IMF loan in dollars, euros or yen in the basket that the nation in question sees fit.

"Over time, there may also be a role for the SDR to contribute to a more stable international monetary system," IMF managing director Dominique Strauss-Kahn has said, according to CNN.

The yuan and other BRIC currencies are not included in the SDR basket, but Chinese officials say that may change.

"We propose to the IMF to adjust its SDR currency basket by 2015 at the latest when it reviews the basket next time," says Yi Gang, head of China's foreign exchange authority and a deputy governor of the People's Bank of China, according to Reuters.

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The death of terrorist mastermind Osama bin Laden means the U.S. military is quick and powerful and can do what it wants. It also means that since the U.S. military is that unrivaled, then the dollar will stick around as the world's only reserve currency. History shows us...
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2011-28-05
 

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