Dollar will not prevail

Treasury: Dollar Will Prevail As Long As U.S. Policies Are Sound - Real Time Economics - WSJ

Meanwhile, Fred Bergsten, who served in the Carter Treasury and is now head of the Peterson Institute for International Economics, is arguing that the dollar’s days are numbered. Writing in Foreign Affairs, he says, the dollar’s position as the default international currency has made it “much easier for the United States to finance, and thus run up, large trade and current account deficits with the rest of the world.” But the U.S. trade deficit, along with the huge U.S. budget deficit, laid the groundwork for the current financial crisis. So he says it is now time for Washington to realize that “large external deficits, the dominance of the dollar, and the large capital inflows that necessarily accompany deficits and currency dominance are no longer in the United States’ national interest.” It’s time to start creating an international currency system that does not rely on the dollar, he concludes.

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