Will China’s Currency Overtake the Dollar?
At a hole in the wall food service shop in Long Island, the sign in the window reads, "Euros welcome here." It wasn't long ago that the dollar reigned supreme in every country on earth. If you traveled abroad, you could count on getting goods and services by waving the dollar as if it were a flag of consumer freedom. But that was before the U.S. debt and deficit made front-page headlines, and before the head of the World Bank, Robert B. Zoellick, said, "The United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency."
At his speech yesterday at the School for Advanced International Studies at Johns Hopkins he warned that America's economic clout is declining and that currencies from China and Europe could provide acceptable alternatives to the dollar for international financial transactions. Zoellick, a former deputy secretary of state under George W. Bush, blamed the shift on America's unbridled spending: "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?"
