US dollar may soon be replaced as world currency

Federal gov’t continues to flirt with disaster, says PH exec


Playing a game of brinkmanship, the United States government may just end up hurting itself as other countries start to plot out long-term strategies to find replacements to the greenback as the world’s de facto currency.

A senior official of the Philippines’ central bank said that the US government risks losing its “exorbitant privilege”—being the issuer of the world’s most used currency—if its polarized Congress were to continue flirting with disaster by waiting to resolve a potential crisis at the eleventh hour.

“In economics, it’s called the game of chicken. The first one who blinks loses. The problem is, if nobody blinks, you’ll have catastrophe,” said Felipe Medalla, a member of the Bangko Sentral ng Pilipinas (BSP) Monetary Board.

Medalla said last week’s debt ceiling talks in the United States, which was resolved by Congress just hours before the United States were to default on its debts, revealed that there was a real need to find alternatives to the US dollar as the world’s international reserve currency.

The US government nearly reached its legal borrowing limit, also known as the debt ceiling, last Oct. 17. If it failed to beat the deadline, the United States would have defaulted on maturing US treasuries which, until recently, were considered a risk-free instrument.

Last week, Fitch Ratings put the US government’s sovereign credit rating on negative watch, indicating a potential downgrade in the next few months.

The short-term deal reached by the US Congress last Oct. 16 would enable the government to borrow until February next year.

In a statement last week, BSP Governor Amando M. Tetangco Jr. said the longer term consideration was, “when and in what form a more durable solution would be reached.”

Tetangco said the ability of the US Congress to come up with a long-term solution was also questionable.

Markets must keep an eye “on forthcoming negotiations and, depending on how these will evolve, confidence can either improve or remain low,” he explained.

Medalla, a former Socioeconomic Planning secretary, said it was unlikely that the Democrats in the US Senate and the House Republicans would allow the world’s largest economy to default on its loans, which could trigger a crisis worse than the global financial meltdown of 2008.

“The thing to do is to expect that cooler heads will prevail…. It’s not in their interest to [default on loans],” Medalla said.

And even if the United States were to default on its loans, he said, most of the US treasury notes held by the Bangko Sentral ng Pilipinas would mature over the medium term. This means that the non-payment of the United States will not directly affect the country’s foreign exchange reserves.

“The only way to punish the US is over the long term, as the world tries to find an alternative currency. But for now, the options are limited,” Medalla said.

One possible alternative is the euro, he said. But the euro zone’s economy remains weak, undermining the currency’s stability.

Another potential replacement to the greenback is the Chinese yuan, the currency used by the world’s second largest economy.

But Medalla said that, unless China allows its currency to move with the market—instead of pegging its value to the US dollar—the yuan may not be considered a serious alternative.

“We’re stuck, and we hope that people are reasonable and rational. The much dreaded catastrophe will not happen,” he said.

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  • hello stupids

    China do not want anymore greenback!!!!!!!
    can’t U see that ???????

    • koolkid_inthehouse

      hoard it yourself. wipe your donkey with it.

      • hello stupids

        can U?????????

      • koolkid_inthehouse

        it’s a donkey hole wipes at this point.

  • hello stupids

    just the way it is
    when U trade with China why pay by the greenback?

    • koolkid_inthehouse

      who cares I still want greenbuck in my pocket

  • dragonian

    congradulations………………….at least there’s one in million of flips chimps spotted what’s trending now……go on skinless sore-azz chimps…..saved more uncle’s mickey mouse money…..

  • japokjackpot

    i prefer juno or moneta… let’s go back to the basics… RESET the button

  • argz

    “And even if the United States were to default on its loans, he said,
    most of the US treasury notes held by the Bangko Sentral ng Pilipinas
    would mature over the medium term. This means that the non-payment of
    the United States will not directly affect the country’s foreign
    exchange reserves.” – Medalla

    This is patently wrong. If the US defaults, the ‘value’ of the US$ will dive and so will the value of the US Treasury Notes held by the BSP. When the dollar dives, so will the peso. It is not too late in the day to start accumulating Gold. Let’s buy gold with the unstable US$ holdings we have while it is still recognized as a world currency.

  • brentcom

    i extremely oppose the use of Chinese currency(yuan) because it is TAINTED…

    • Kaizensigma

      The Brits have already inked a deal with china for London to become a new hub for the Chinese RMB or Yuan. Early this year Australia and china inked a deal to used their respective currencies for their multi billion $ bilateral trade. So you see the wheels are already in motion.

    • Kaizensigma

      But who cares about you opposing it? You are nobody in the greater scheme of international trade, finances and geopolitics.

      • Zim

        @Kaizebsigma I don’t like Chinese Yuan. You have problem with that? har har har har har!

  • Copernicus99

    Chinese Yuan? You can’t even trust the truthfulness and reliability of the economic data that the Chinese Government discloses.

    • Kaizensigma

      Can you trust your own government?

      • Copernicus99

        The question is irrelevant to the subject at hand. The issue is whether the Chinese Yuan is an acceptable substitute to the U.S. dollar as the world’s de-facto currency.

      • Kaizensigma

        The Aussie and the Brits seems to be confident of the yuan’s viability and as one of the solutions proposed that may one day offer a credible alternative to the $. This in itself shows the level of trust these two nations have as far on the long term prospect of the Chinese economy.

      • koolkid_inthehouse

        Hard to convince the world to use Yuan as substitute for the greenbuck.

      • Kaizensigma

        Add Singapore to the growing list nations that have started direct currency trade with china yuan.

      • koolkid_inthehouse

        Singapore mostly deal with communist China. Who want’s to hoard communist Yuan when at the whim of communist leaders can change the value like a seesaw.

      • Kaizensigma

        Sounds like you are running out of lame excuses and explanation. Everyone knows Singapore is an international economic powerhouse in Asia.

      • koolkid_inthehouse

        and you think Singapore is not hoarding lots of US dollar? Communist China’s economy could collapse anytime too. It’s not as stable as the US. Communist China government could collapse too if they can’t keep down the growing rebellion of its population. The future is not really that bright amid heavy smogs either.

      • Kaizensigma

        I am sure Singapore, Brits, Aussie know what they are doing, wont you say so? Or if you know something that they don’t already know, you may want to lecture them, maybe they will listen to you? You seem to be a self described international financial genius? Besides, if the almost $10T chinese economy does collapse it will surely bring the rest of the world’s economy down with it and that includes the minuscule irrelevant phil economy. Already as it is, the phil stock market and currency market moves up and down based on financial and economic data from China.

      • koolkid_inthehouse

        Even communist China is hoarding US dollars. So is UK and the Aussies. They hoard Russian rubles, Indian Rupees etc. its because its advantageous to them. But when time get tough who are they going to keep green buck and gold and maybe Euro or pound.
        Unless the communist will not artificially keep the yuan low. It must be a free market fair value not attach communist attach string to it. Let if float in free market and everybody want it. bwahahahahahahaha

      • Kaizensigma

        of course we all know us bonds are still top rate investment grade. but the world is changing and a new world order is emerging. also, the world has been shaken recently by the us congress budgetary and fiscal stalemate. and that brings everyone to start thinking about an alternate solution to spread the eggs and not have it all in one basket. it is sound investment strategy especially when US debt stands at $17T and growing with no solution in sight. US$ will continue to dominate world trade and the currency of last resort as the largest economy, but the days of de facto dominance is now being challenged by major economies including opec especially with the emergence of the new world order. bwaha ha ha ha ha ha…ditto

      • koolkid_inthehouse

        The US is worth more than 17 trillion. I’ll rather have the green buck in my wallet than a communist Yuan. Untrustworthy, who knows what a bomb it call drop in your face.

      • hello stupids

        that is yr world not global
        that is the trend…

      • koolkid_inthehouse

        take out that finger out you donkeyhole, you giggle like a girl experiencing an orgams for the first time.

  • Beersheva

    The headline is wrong.

    • hello stupids

      how about the facts?

      • Beersheva

        It’s just my opinion. If the $ will soon be replaced what will replace it?

        Yuan – isn’t even freely and fully convertible, from a nation with opaque economic policies and no openness.
        Euro – Europe has monetary union but not fiscal union. Will individual European nations soon give up their fiscal sovereignty?
        Yen – Japan hasn’t even come out of its lost decade(s).

        Even with all that’s happening in the US, the $ is still the best or, putting it another way, it is the least problematic currency. So how soon is soon? I think it could be at least 20 years away if it happens at all.

      • hello stupids

        when U travel to europe will U carrying a Us travel check
        If U want to lost lots for the exchange rate
        of course
        China have lots of different currency for reserve
        how about Philippines?????????
        any country want to keep the peso as the reserve?
        Yuan – isn’t even freely and fully convertible????????
        look at CNN or abc finance news

      • koolkid_inthehouse

        Dumb donkey, we’re talking about the Yuan here and looks like the world will never accept the untrustworthy communist leaders and its currency worldwide. Get some brain so you stay on the topic.

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