Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Disclaimer: The Parliamentary Library does not warrant or accept liability for the accuracy or usefulness of the transcripts. These are copied directly from the broadcaster's website.
US dollar in danger of being funny money -

View in ParlViewView other Segments

ELEANOR HALL: To economic optimism in the US now and the bulls on Wall Street are running today,
with the Dow breaking though the 10,000 mark for the first time in a year.

But the fortunes of the US dollar, the world's reserve currency for 50 years, are heading in the
opposite direction.

Investors are continuing to flock to the safety of gold which is posting record highs on a daily

So can the greenback survive as the world's reserve currency?

From Washington John Shovelan reports.

JOHN SHOVELAN: The mantra of successive US governments since the mid '90s and a song continued by
the Obama administration is that a strong dollar is in the national interest. But fewer investors
are buying it or the dollar.

The IMF (International Monetary Fund) says central banks around the world hold about 62 per cent of
their currency reserves in US dollars - the lowest on record.

Charles Goyette, author of The Dollar Meltdown, says investors won't hold a currency that is
continually shrinking and isn't dependable.

CHARLES GOYETTE: The gold price is signalling to us the collapse of the dollar reserve standard,
the dollar exchange standard. It's going on right now and we're in for a very tough period ahead.

JOHN SHOVELAN: Prospects for growth in the US economy are further undermining the dollar. In
remarks seen as a signal that interest rates would stay at their all time lows, the US Federal
Reserve's vice chairman Donald Kohn said a V-shaped economic recovery "is not the most likely

Frederic Mishkin, former Federal Reserve governor and who co-authored a book with Fed chairman Ben
Bernanke on inflation targets, says those arguing for an interest rate rise to support the US
dollar will have a long wait. He says recovery in the US economy could take several years.

FREDERIC MISHKIN: The kind of recovery we should expect to have is in fact not going to be a super
strong one and we're going to have a tremendous amount of slack in the economy for quite a number
of years. And if there's still a lot of slack there's no reason to raise interest rates. In fact it
would be a big mistake.

JOHN SHOVELAN: Interest rates aren't coming to the dollar's rescue and investors think the Obama
administration is relaxed about the falling currency. It's helping exports and the nation's trade

The US dollar has weakened over the past eight years and some private investors worry the annual
trillion dollar budget deficits over the next decade and trade deficits will drive that
depreciation faster so there's been a hunt for alternatives.

But that, according to Mike O'Rourke of BTIG, the global trading firm, is a long way off.

MIKE O'ROURKE: There's not many viable alternatives to the dollar right now over the next several
years. Europe is not in a better position than we are. Japan is not in a better position than we
are. The UK is easing, their quantitative easing is just as aggressive as ours.

And then the only strong large economy is China and they're pegged to the dollar and they don't
have free capital flows.

You need, you know, a structure, financial infrastructure, free flow of capital, rule of law and
then a strong military to be an important currency in this world as a reserve. And the fact is we
still have all those things. No-one else meets up with the United States on all those marks.

JOHN SHOVELAN: It's become obvious though that Americans can no longer take their dollar's reserve
currency status for granted.

A former US deputy assistant treasury secretary and now head of Encima Global, David Malpass is
quoted saying, "Money wants to go to where it can get a steady return in real money, not in funny
money. And in many ways the dollar is becoming the funny money currency for the world."

John Shovelan in Washington for The World Today.