For decades now, the world financial system has relied on the strength of the U.S. dollar to trade a wide variety of commodities. Everything from pork bellies to oil futures rested on the American currency. Now after nearly forty years of economic decline on the world stage, the U.N. is finally giving a hard look at moving towards a world currency that could provide more stability than the dollar.
"The dollar has proved not to be a stable store of value, which is a requisite for a stable reserve currency," the U.N. World Economic and Social Survey 2010 said.
The report says that developing countries have been hit by the U.S. dollar's loss of value in recent years.
"Motivated in part by needs for self-insurance against volatility in commodity markets and capital flows, many developing countries accumulated vast amounts of such (U.S. dollar) reserves during the 2000s," it said.
Now this development is not being taken lightly. Opposition quickly formed to say that markets will decide whether or not a reserve currency should replace the dollar's dominant position. However leading economic gurus such as Nobel Laureate Joseph Stiglitz are advocating for a new way, as many developing countries have suffered from the current situation.
Whether or not this news will lead to substantive change, it is indicative of a growing consensus that the dollar is not working on a macro level. Gulf states have already begun looking at alternatives and the developing world could very much turn if the I.M.F. were to utilize a reserve unit of currency.
Only time will tell, but the way the U.S. is holding itself economically (both domestically and internationally) a new way may not be too far off.