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Why US Dollar will remain as World Reserve Currency!

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Dr A S Johan
According to popular Blogger Fredy the Fly of the fly tales - even with Obama in the white house, the ever popular Dollar bashing is on again. We keep hearing that countries around the world want to replace the
US currency with something else as their reserve currency...but what?

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Sitting on a wall in the newsroom of a major television studio, I heard that several countries will be meeting (again) soon to discuss alternatives and that central banks will start selling the dollar in favor of something else...again what it will be is not certain.

We hear comments like "Chinese officials have sought a greater role over time for the International Monetary Fund's unit of account, known as Special Drawing Rights in an effort to reduce the dollar's dominance. We also hear stuff like "Chinese official said he was not aware of a plan to discuss a new reserve currency at a Group of Eight meeting next week."

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Fredy says it's all a load of crap. Probably perpetuated by professional market makers to create volatility in currency markets so it'll lead to more trading and of course more commissions (or spreads as it's now politely called).

Here's my take: if and when non US central banks start selling US Dollars aggressively... watch carefully and wait to start buying USD against other currencies - particularly the currencies of those countries who's central banks are the most aggressive sellers. Central banks are notoriously famous for getting it wrong. Historically they've always sold at the worst possible time.

No doubt many countries around the world - particularly those who have a few extra coins jingling in their emerging market pockets from selling crap to US consumers, would like to see the power of the US Dollar and thus the US of A significantly reduced.

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That's just wishful thinking. I say that in spite of all the so called fundamental reasons as to why the US Dollar should be weak and therefore sold - it will continue to remain the world's reserve currency for just one simple reason i.e. every single US Dollar is backed by at least 120% of solid military capability. No other currency in the world or even gold has that going for it.

Now I don't know about you but I'd like to keep my money in a well protected place. Remember that when push comes to shove, the winner is always the guy with the biggest club... and uncle Sam has the biggest one of them all. Notice how US Dollar denominated Treasury Securities get bought up like mad every time some tin pot madman threatens to destroy the world.

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Dr A S Johan is a financial and business adviser to sovereigns, corporations and family officees in Asia and the Middle East.

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