Reply #3: I think discussions will start on this at the G7 meeting next month.

[54anickel]

It could get interesting, and the news that will come from that meeting will be very carefully worded.

The "buzz" I've picked up is that there is speculation of moving from the US dollar as a reserve currency. To what is the question. Here are some of the alternatives I've caught wind of, in no particular order.

Trade and currency zones - each zone will be based on who trades with who the most. Trouble with that idea is that in this new "globalization" world, trading partners could change.

Moving to the Euro - much speculation on that, but also much disageement. Reason for is obvious, right now it's a high value and perceived to be the best choice. Arguments against, it's young, the EU is not doing well on ironing out their differences with regards to the constitution. There is no EU independent military (they are working on that but US will fight that idea - one of the reasons they are looking for something for NATO to do again). The Euro is just another fiat currency. As such, it will be prone to the same issues as the dollar. Germany did not help this perspective when they allowed their deficit to grow beyond the EU Stability Pact limit. There may be a temporary move to the Euro while the Central Banks bring their reserves in order. The SAFTA talks went very well, and the countries involved in that are not crazy about a strictly fiat currency.

Returning to a gold/silver based standard. There is a lot of talk about this, but it will take time. The PMs would need to find their true value in a non-manipulated free market. Also Central banks would need time to get their reserves in order from the years of both covert and overt gold leasing. China has been working on building their reserves lately (theirs are the lowest) as well as many other countries. Lots of speculation in the PMs now.

For the time being, the world has a vested interest in the US dollar. Abandoning it would be extremely detrimental to the world economy. They will continue to "put up with it" as they attempt to get their ducks in a row.

JMHO