The reserve currency

Another concern discussed in recent months is whether or not the U.S. dollar will remain the world’s reserve currency, given its long-term bear market.

However, Goldstein questions whether other countries even want to fill the void.

“It’s not clear that the BOJ or the ECB even wants their currency to become the global reserve currency,” Goldstein says.

However, this is not a question that will likely be answered in terms of months; it may take years or even decades to resolve the answer, some analysts say. One possibility is the world could move toward a multiple reserve system, in which perhaps the reserve “currency” could be a combination of currencies –– say, the euro and yen.

Looking at the weaker dollar, and the huge U.S. trade deficit and current account deficit, Goldstein concludes, “It’s a problem and it isn’t going to go away. But it isn’t going to be a doomsday scenario. We could have this conversation again in December 2005 and very little could have changed.”