Yes, the status of USD as the reserve currency has been eroding. But no, we are nowhere near the tipping point, let alone it ceasing to be the reserve currency. You don't need to go any further to see that than the quote from Bank of Korea yesterday. Speaking from memory, they said that "We are politically free to set policy as we want. But we are not free from the Fed and have to adjust policy according to the US funds rate."
In other words, the Fed exerts a greater influence on the Korean central bank than their own government. If the USD was not the reserve currency, this would not be the case. Nor would ECB care about the parity with USD any more than parity with any other currency. Nor would OPEC be quoting oil in USD or the emerging markets debt be in USD.
And all of these make the Fed's job much harder because the world is interconnected. An EM currency crisis can, and several times has, led to major crashes in the US markets.
Everyone, including the US, will be better off when we make the transition. If we had farsighted politicians, they would be initiating this transition such that it would be smooth and in a manner most suited to the American needs. But as it stands, it will likely be architected by the BRIC and OPEC+. |
