The dollar is a world reserve currency only because we are the only ones who ‘allow’ a trade deficit.
With a trade deficit, the rest of world is long your currency.
With a trade surplus, like japan, the world is short your currency.
The eurozone wants a trade surplus and to be a reserve currency.
They are either ignorant of how a monetary system works or have the arrogance of demanding the violation of an accounting identity by decree???
> On Fri, Nov 14, 2008 at 12:15 AM, Russell wrote:
> If True ÃƒÂ¢Ã¢â€šÂ¬Ã‚Â¦ hyper inflation in the pipe.
French President Nicolas Sarkozy said on Thursday ahead of the G20 meeting of world leaders:
“I am leaving tomorrow for Washington to explain that the dollar cannot claim to be the only currency in the world…, that what was true in 1945 can no longer be true today”.
There have been many previous indications that the dollar would not remain the world’s reserve currency for long. But this is a dramatic statement by a close American ally.
Reading between the lines, I am guessing that Sarkozy is pushing for a shift from the dollar to a basket of currencies as a world reserve standard, instead of a change to a single currency such as the Euro or the Yuan.
But we’ll have to wait and see what Sarkozy is really advocating.