The US dollar will keep its position intact as long as other nations are willing to invest their reserves in the dollar. The size and sophistication, innovativeness and resilience and political and military strengths of the US economy will also stand by the USD. Correcting the current plight of the dollar is not going to be painless. Economies like Japan, China and South Korea will slowly learn to live with the adjusted value of the dollar. Unless the US is too irresponsible, economically and diplomatically, the USD will enjoy the major reserve currency status for some more decades.
No, the dollar's days are not over. Never mind the speculation about how far down the value of the US Dollar (USD) will go and how long it can retain its status as the world's sole reserve currency. A rival to the USD appears to exist in the form of the euro, but that contention will remain superficial and on paper only and the USD will retain its unique status for the foreseeable future-at least a few more decades.
The size and sophistication of the US economy, its innovativeness and resiliency, its political and military strength and its willingness to use them when required-all these will stand by the USD. The United States has gained from its currency's status as the world's reserve currency; the Americans have skillfully exploited the advantages and privileges that come with that status and they will do anything to retain that privilege. According to some commentators, the invasion and occupation of Iraq was one intimation of that determination.
Anyway, the foreign exchange markets have passed a verdict: The USD is quite overvalued and the prospects of recovery for the ailing currency (at least in the short term) are not bright. |
