Dollar not what it used to be

The US dollar may still be king in terms of foreign-exchange reserves and denomination of international transactions, but the American currency is no longer absolute monarch of the global economy. The yawning US trade deficit and a huge overhang of debt denominated in greenback are causing concern regarding its reserve currency status. Since the middle of the 20th century, most countries have held the majority of their foreign exchange reserves in dollars. This means that the greenback is constantly in demand, whatever the underlying need for US products; now, with massive trade and budget deficits to finance, Americans are increasingly reliant on that status. The unprecedented weight of US liabilities means that a threat to the dollar’s dominance could result in a currency collapse. Under present conditions, can dollar hegemony last? The Russians for one don’t think so, having since last spring openly questioned the greenback’s pre-eminence as the world’s