A few weeks ago, a rather interesting report was published by the United Nation. This report called for the establishment of a new global currency to replace the US dollar as the world’s reserve currency.
Basically, this is a radical proposal to totally reshape the world currency market. However, it is not a new idea. Russia and China have already suggested something similar in the past, and some countries are either considering changing their reserves to a different currency or are already doing it (Iran is one example, though mostly for political reasons).
This wouldn’t have happened if the economy wasn’t so bad and the dollar so weak. What is basically happening is that the weak dollar has made currency reserves lose tremendous value and a lot of countries are worried because of it. Because the FED has printed so many dollars, there is a growing fear that the American currency is headed for a long term period of weakening.
So, is a Forex revolution underway? Is there going to be a new global currency?
Not so fast, the countries of the world can’t seem to agree on anything these days, so I doubt they’ll be able to agree on a new global currency and create accepted exchange rates. In addition, I highly doubt that the US is going to stand for something like this.
However, what we may see is more diversification in the currency of choice for reserves of various countries. This may happen sooner than you think and with many countries. This may lead to more selling of dollars and a greater pressure on the US currency.
When this will happen is anyone guess, but as to a new global currency, I wouldn’t hold my breath.
