Yes, there has a been a lot of talk regarding the USD remaining the world’s reserve currency. You are correct in stating that it is something we can’t force, other nations have to cooperate with us.

My sense is that as long as oil (energy) is priced in USD, then we’ll be ok. Who knows what would happen if major oil producing nations priced their crude in something other than USD. Yen, Euros, gold…?

I tend to agree that many nations want to keep the status quo for fear of change. It is hard to select another currency; most Asian countries don’t trust Japan enough to use Yen (WWII issues). Plus the Euro is new and could even break up back into individual currencies during the current depression. What’s left? No one is really going back to the gold standard after the luxury of fiat currency. Besides we have ground troops in Iraq and Afghanistan plus naval forces in the region. Gulf countries refusing to sell oil in dollars would be an act of suicide.

Thus, “when you have eliminated the impossible, whatever remains, however improbable, must be the truth.”

Hence continued dollar hegemony.

You’ve put your finger on the major difference between the US and Iceland economic remedies – our ability to print ourselves out of trouble. I think we actually are just deferring the inevitable – the need to pay the piper.

So, how long will the world allow the US to remain the world’s reserve currency? My bet is that a lot of nations quietly want us to continue because we have the ability and agressiveness to take action – any action – needed to save the financial system from a meltdown. A lot of nations couldn’t, or wouldn’t, take action – even though they talk a good talk – they really can’t walk the walk.

Tom

We will feel worse next November/December at the year end than this year. That won’t be good for moral.

Our saving grace so far is that as the world’s reserve currency we can print away our problems better than Iceland.