Tags: Eichengreen Dollars Reign Coming to an End

Eichengreen: Dollar's Reign Coming to an End

Thursday, 03 Mar 2011 08:09 AM

The U.S. dollar will soon cease to be the world's only reserve currency as global businesses will rely on several currencies, says Barry Eichengreen, professor of economics and political science at the University of California at Berkley.

Fully 85 percent of foreign-exchange transactions world-wide take place in dollars today, while more than 60 percent of the foreign reserves of central banks and governments are in dollars, Eichengreen writes in The Wall Street Journal.

That's all going to change.

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US dollar faces troubled times
"I believe that over the next 10 years, we're going to see a profound shift toward a world in which several currencies compete for dominance."

The dollar has long been viewed as safe and reliable for global business due to its liquidity and prevalence.

Yet currencies like the euro and Chinese yuan are big enough to compete now, especially in view of how rising U.S. debt levels are gnawing at the greenback's strength.

Technology is making it easier to sidestep the dollar also.

That's going to make doing business easier for Chinese and European companies and tougher for U.S. firms — and for Washington.

"In this new monetary world, moreover, the U.S. government will not be able to finance its budget deficits so cheaply, since there will no longer be as big an appetite for U.S. Treasury securities on the part of foreign central banks," Eichengreen says.

Some say a weaker dollar, however, will help the U.S. out in the short term.

"Some further real effective depreciation of the U.S. dollar would help ensure a sustained decline of the U.S. current account deficit towards a level more consistent with medium-term fundamentals, helping to support more balanced growth," according the International Monetary Fund, the AFP newswire reports.

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The U.S. dollar will soon cease to be the world's only reserve currency as global businesses will rely on several currencies, says Barry Eichengreen, professor of economics and political science at the University of California at Berkley. Fully 85 percent of...
Eichengreen Dollars Reign Coming to an End
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2011-09-03
Thursday, 03 Mar 2011 08:09 AM
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