In his book Currency Wars, James Rickards provides an alarming commentary of how precarious the world economy really

is. All that we accept as undeniable and unshakeable stores of value, he contends, are really very much like fragile pieces of glass liable to shatter catastrophically at any moment.

The financial press, and indeed, the common public whole heartedly believe in the immortality of the dollar its undeniable position as the worlds reserve currency. Is the dollar really immortal? Will the dollar continue to dominate on the global economic stage as it has for decades? Or will it slowly atrophy into the background? Worse still, will it calamitously collapse, taking down with it the economy of the United States, and by association, the economy of the world?

In reading Rickards book, one is given good cause to think it certainly very plausible, especially given the contemporaneous happenings in the financial world, that a violent upheaval is on the cards.

Nixons decoupling of the dollar from gold in 1971 was, in effect, a declaration of the United States insolvency. The US government, having issued what were, in effect, warehouse receipts to gold, reneged on its promises, and said that those receipts would no longer be honored.

Amazingly, the world allowed the United States to continue to have control over the printing presses of the worlds reserve currency backed by nothing except the full

faith of the US government. The United States has since, as has become fairly obvious, abused this privilege and has printed dollars for its own benefit. Having convinced OPEC countries to price oil in dollars, the US effectively converted the dollar into an oil-backed currency, giving it tremendous importance in the one commodity that would take center stage amongst all global trade oil. This convenient system artificially bolstered the dollar by allowing the US to export inflation by buying oil and other commodities by using money it could print out of thin air. The Fed has been running this Ponzi scheme of sorts, right under the noses of the international financial market for several decades. The US is borrowing more and more and running up debt of titanic proportions. It is clear that a time will soon come when the global community will recognize the lie that is the dollar and it will all come crashing down. In anticipation of this, we have already started to hear tiny squeaks and squeals made by a few who have the gumption, or feel a immediate pinch to replace the dollar as the worlds reserve currency. Soon these squeals will turn into a loud murmur, and before you know it, there will be loud shouts calling for the replacement of the dollar as the worlds premier currency. Reasons for this change are many, and evidence that the change has already started abounds.

That the dollar will have to relinquish its exalted position is certain. How this change will come about is less so. A failure of a dollar denominated bond sale, for example, might raise some eyebrows. Such a failure could either be ignored by the market as a one off event, or investors globally might see it as the first signs of a

precipitous collapse of the dollar and rush to get off their dollar positions all at once, wanting to cut their losses and cause a worldwide dumping of the greenback. Such a cataclysmic implosion of the dollar, though certainly not impossible, seems unlikely. A gradual decline seems a far more probable alternative one that many argue, is well on its way. Evidence of this gradual move away from the dollar is aplenty. The IMF and the UN have openly called for a new world currency. Russia and Chinas calls for the same are no longer hopeful instances of loud thinking, but actual policy decisions, which are being enacted, and in most cases, successfully so. Several countries are slowly building up hoards of gold, slowly but steadily driving up bullion prices. Several countries have aggressively started making alternative trade arrangements where they bypass the dollar completely. The share of the dollar in international trade has been gradually falling a strong barometer of the dollars diminishing popularity as a world reserve currency.

What are the alternatives to the dollar? It is unlikely that a singly currency will suddenly rise to smack down the dollar. Several strong currencies will likely rally towards reserve status, resulting in a basket of currencies acting as reserve currencies with or without the dollar. Several candidates for a position in this basket exist. The Euro though growing in its use as currency for international trade, is itself facing massive issues. Questions about its survival in the immediate future are still not fully answered as Spain and Greece grapple with their impending demise. The

Euro will likely survive its current infraction, but will probably emerge weak and in need of frequent resuscitation hardly the characteristics of a global reserve currency. The Chinese governments recent attempts to free up their currency and let it float more freely against other currencies is seen as the first steps towards establishing the yuan as a strong contender in the international market. Many international studies are increasingly pointing towards the yuan establishing itself as a reserve currency to the extent of the greatly diminishing dollar. The swiss franc has always been a solid investment for most; retaining its value well when all else was in upheaval. Although the franc could certainly be in the basket of several reserve currencies, it is impossible that it will become the world currency by itself. There just arent as many francs around so as to support the volumes required for global trade. The IMF has been pushing for the SDR to be used as a global currency. SDRs are made up of a basket of certain world currencies in pre-determined ratios, namely, the sterling, the dollar, the yen and the Euro. While a strong contender, especially with the strong backing of the IMF, the SDR has several gaping drawbacks an important one being that it is backed by nothing. Inflationary fears of an unchecked creation of SDRs, such as a recent issue of $200 billions worth, makes the SDR just as unreliable as the dollar it is supposed to replace. A return to the gold standard would be a very viable option. However, the worlds gold supply can only increase by around 2% annually. This is far less than the

average global GDP growth of 4%. It is not clear how a reserve currency pegged to gold would be able to battle this strong deflationary pressure. Multiple Reserve Currencies: Given that there is no calamitous free fall of the dollar, it is very likely that several currencies of important growing economies gradually grow in prominence. They would form a system of multiple reserve currencies. Unless something fundamental changes, these currencies are likely to be the yuan, the Euro, the yen, the rupee and the dollar, though now a shell of its former self. Countries with substantial

resources will likely move away from the dollar and regional trading blocs will emerge each with its preferred trading platform, and a preferred reserve currency. The free market and the productivity of a country will determine the value of its currency. Market forces will punish low economic productivity with a devaluation of that countrys currency. This devaluation will naturally spur that countrys export standing, thus constantly acting to restore a global equilibrium. Purported devaluation efforts will likely cause a loss of faith in a countrys currency and cause the system to move away from that currency as a reliable trading instrument. This multiple reserve currency system, though not without its own flaws, will likely be able to lead the world into another period of prosperity and the world will once again see a period of sustainable stability.

The fall of the dollar is inevitable. So fundamental is this prediction, that it usually elicits a vehement disbelief from the average American. Americans are particularly prone to a reactionary dismissal when exposed to facts that disrupt their

misconceptions. The current American generation has only known a period of general prosperity and well-being. Yes, there have been minor bumps in the road, but no violent national level crippling tragedy has befallen the country in the memory of the contemporary American. This false feeling of security tends to breed an overtly unrealistic expectation of ease, wellbeing and prosperity. It causes apathy and laziness. It molds the national sentiment into one of debilitating, boastful cynicism, hostage to the establishment and an infatuation with the status quo. Even the most obvious evidence of change fails to penetrate this foggy shield of duplicitous funk. This is especially troublesome as it causes a certain reluctance to brace for or at least plan for such an eventuality. Global cues and political undercurrents all point towards, and provide irrefutable proof that the dollar is on its way out. While several alternative scenarios are possible, a system of multiple reserve currencies seem to be very likely. The balances of power will shift drastically. The world has seen the rise and fall of many seemingly unshakeable currencies. The drachma, Real, Dinar, Paseta, Ducat, Thaler, Krona and sterling have come and gone. The dollar is not immune to the cyclical laws that are universally applicable. While it may not have completely run out of steam, the dollars demise is around the corner.