The chances remain good–in my opinion–that the dollar will remain the international reserve currency for many decades to come. As a consequence, I tend to dismiss concerns that the dollar will eventually be replaced or supplanted by either the euro or the renminbi.
But when someone of the stature and intellect of Robert Zoellick, the World Bank President, tells us that the dollar may well be replaced by the euro and renminbi, I get concerned.
I get even more concerned when I read the following:
“The greenback’s fortunes will depend heavily on U.S. choices,” Mr. Zoellick said. “Will the United States resolve its debt problems without a resort to inflation? Can America establish long-term discipline over spending and its budget deficit?”
Granted, as the story mentions, Zoellick was seeking to be provocative. But his words should still raise alarm bells; especially given the implication that ensuring the dollar’s preeminence means establishing fiscal discipline here at home. With the Obama Administration preparing to bust the budget beyond imagining, I do not know how anything remotely resembling fiscal discipline will be in the offing.