Falling U.S. dollar fuels BRIC dollar reserve change

by LJ Miehe on March 23, 2009

Editor’s Note: These calls have been getting louder and louder in the past couple weeks for an alternative global reserve currency other than the U.S. dollar.  Many of our largest holders of dollar reserves are not happy about the U.S. policy of continual bailout of bad financial institutions.

If the U.S. continues these polices we could see the dollar be replaced by either a basket of currencies, SDRs or gold bullion.

Update: Here is a link to a Forbes story about China talking about replacing the U.S. Dollar with SDRs as the reserve currency [Link]

News:

A push by the world’s leading emerging economies to dislodge the dollar as the dominant global reserve currency appears to be gaining momentum even as a weakening greenback adds further urgency to the discussion.

China on Monday added its voice to a growing international chorus seeking the replacement of the dollar as the main reserve currency, urging for an overhaul of the global monetary system to allow for wider use of Special Drawing Rights (SDRs) allocated by the International Monetary Fund (IMF).

Chinese central bank chief Zhou Xiaochuan said the SDRs, created by the IMF as international reserve assets in 1965, could be used as a super-sovereign reserve currency, eventually displacing the dollar.

His comments come a week after Russia said it would put forward a proposal for the creation of a new reserve currency issued by international financial institutions at the G20 meeting in April.

Russia said it had the broad support of its fellow BRIC countries — Brazil, India and China — as well as South Korea and South Africa for its proposal.

The push underscores growing concerns among emerging-market leaders about the long-term value of the dollar.

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