The Decline of the U.S. Dollar?
In the article, The Dollar: Soon to Swooth, the author quotes Mohammed El-Erian who is the head of the world's largest bond fund. El-Erian states that the dollar is destined to decline and lose its status as the world's reserve currency. El-Erian also states that the most serious risk is a "disorderly decline." This may be true from his point of view, but from the point of view of Americans the most serious risk is the decline itself. The article states that in the 80's there was fear that the dollar "was loosing out" to the Japanese Yen. This fear was squashed, however, through the 90's by strong growth in the U.S., and by narrowing the deficit. It is interesting that the growth in the 90's occured only after strict fiscal policies were adhered to by the Reagan Administration. In this article, Warren Buffet, is quoted saying that the future of the dollar is in the hands of Congress. It is good that the majority in the House has been regained by potentially more fiscally conservative republicans. The deficit must be reduced for the U.S. dollar to remain as the world's leading currency.