UN Calling for New Global Reserve Currency

The UN has begun to echo China, Russia, France, and India’s calls for the US Dollar to be stripped of its position as the world reserve currency.  For the past year or so, SDR’s have been looked at as a replacement for the dollar.  These SDR’s are made up of many different currencies weighted differently.  They take into account the fact that the global economy is no longer made up of a few huge isolated players, but instead is more interconnected and interwoven.  The SDR basket of currencies would likely be a more efficient reserve currency; at least it would be fairer to other non-superpower countries that are looking to emerge from this most recent recession as key global economic players.  This news however, adds insult to injury for the broken US economy.  Not only are the talks of a reserve currency switch already starting to hurt the Greenback, but the US Dollar has already seen more than its fair share of devaluing over the past year.

The huge economic stimulus that was passed earlier this year by the Obama Administration has served to create some real tension among investors and consumers alike.  Many are concerned about the possibility of inflation or hyper-inflation that may be coming since there is so much more money floating around now, or soon to be floating around in the market place.  Without real pressure, the UN and other countries pushing for a major shift in reserve currency could very well knock the US out of the superpower status it has enjoyed and arguably sometimes abused for roughly the past century.

A shift away from the US Dollar would likely not happen overnight.  The countries that are advocating it are proposing a ten year timeline.  And even after the ten years, the US Dollar will likely comprise a very robust chunk of the SDR currency basket.  Some countries have speculated that the dollar would make up as much as 45% of the SDR basket while other reports say that it would be closer to 30%.  The more weight the US Dollar has in that SDR basket the better the US economy will bode.  It will be up to the Obama Administration and the US Government’s team of economists to try and keep as much of the dollar in the SDR basket as possible. 

There are certainly going to be some major shakeups once the dollar is pushed off its pedestal, and there are some fairly easy and inexpensive ways to prepare financially for this shift.  Commodities, which at one time were valued in US Dollars, would likely get huge boosts from a shift away from the dollar as an exclusive reserve currency.  Oil, gold, silver, other precious metals, as well as corn, wheat, and sugar will also gain some serious upward momentum since many argue that the US has been able to unfairly manipulate these markets due to its sizable influence in the worldwide economy.  Building a portfolio around these and other commodities may not be such a bad idea if an investor was looking to insulate themselves against a massive slide in the dollar’s value.