Eichengreen and the Dollar

BERKELEY – For more than a half-century, the US dollar has been not only America’s currency, but the world’s as well. It has been the dominant unit used in cross-border transactions and the principal asset held as reserves by central banks and governments.

But, already before the recent debt-ceiling imbroglio, the dollar had begun to lose its luster. Its share in the identified foreign-exchange reserves of central banks, for example, had fallen to just over 60%, from 70% a decade ago.

Eichengreen might look at the relationship between oil prices and the dollar deflater, unless he is trained in denial.

The dollar follows the term structure of oil, they've run together since 2001. That means that the dollar can predict no further than the oil network, and the oil network from discovery to gas tank is about ten years. Unless we solve the liquid fuels shortage, whatever currency we adopt is limited to ten years of storage.