Undoing of a Reserve Currency

Published in Mint on Dec 27, 2007

With the rate-cuts by the US Fed, ostensibly to prop up the housing market, Bernanke has signalled to the world that they couldn't care less about the value of the US Dollar. As to when the rest of the world is going to realize is the Question.

My guess is that these are the final years of the US Dollar as the world's reserve currency. The chances that this status quo continues beyond the next 5 years is remote. Unless, ofcourse, the US Fed changes policy to start a series of rate-hiking initiatives and also signals the intentions of returning to a hard-currency standard.