IMF Calls for Dollar Alternative
Feb 11, 2011
NEW YORK (CNNMoney) -- The International Monetary Fund issued a report Thursday on a possible replacement for the dollar as the world's reserve currency.
In 1944 the US dollar was made "the world's reserve currency" at the Bretton Woods conference. That era is now drawing to a close.
When Nixon took America off the gold standard in the early 1970's, an agreement was made by which all international oil sales would be priced and paid for in dollars. This supported the dollar even when it was no longer backed by gold.
The oil-backed dollars is now about to be replaced by the Iraqi dinar, because central banks around the world will be using their dinars to purchase oil from Iraq. I think that oil will be purchased in both currencies for a while, but with the value of the dinar going up and the dollar going down, the dinar will effectively replace the dollar.
The long-term effect of this will be that the dollar will be devalued. We can expect to see the price of oil rise about $5 soon and the price of all imports will go up. At the same time, however, our exports will become more competitive, so this will help other businesses. Perhaps we will see fewer jobs going overseas.