The post-financial crisis: The dollar's status

Authors:
José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net

With the financial crisis that began in the U.S. in 2008, the debate about "the dollar's status" in the present and future world has gained intensity.

For example, for important figures such as Joseph Stiglitz the U.S. currency is losing its status. He says its role as a conservative asset is questionable and cannot remain the pillar of the global reserve system. For the Nobel Prize-winner, the dollar has a high degree of risk because of the huge fiscal deficit and the debt burden on the U.S. government.

However, while Stiglitz's remarks are well founded, and it is true that the falling value of the dollar over the last decade may persist, in our view it will continue maintaining a major role.

We believe this based on the fact that the U.S. remains the planet's most important economy in every way, about 70% of the world's currency reserves are denominated in dollars, and at least 7 out of 10 transactions in the globe are made in that currency. Moreover, the U.S. Government's deficit and debt are realities as old that are part of the North American history.

Therefore, the dollar's role as leading currency is not over, although in the future it will no longer monopolize the global reserve system, seeing that other currencies will also ensure stability. Nevertheless this scenario will not mean the end of the U.S. currency as a store of value, but the consolidation of development in other parts of the Earth.

A multipolar world is approaching and will be reflected in a multi-currency reserve system, though still led by the dollar.

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