Then why would the US go along with allowing the dollar reserve currency to go away? Answer: they won't go along with it at all.
There's no strong replacement for the dollar, and looking out over the next 20 years, there are none even on the horizon. An independent digital currency perhaps, but that would be outside the realm of the context you're talking about.
China is one of the most indebted nations on earth, even more so than the US, and the Yuan isn't a first tier currency. As they accumulate ever more debt, it's going to guarantee their currency is never trusted globally.
The Euro is practically ripping itself apart at this point, and always had to (unless they choose to go all the way as a union). After seven years of zero growth, the ECB has taken to debasing Euro members standards of living to reduce debt and artificially (and temporarily) juice the economy. Unlike with the US QE program, in which dollar inflation is substantially exported and others pay part of the QE cost, the Euro members will bear almost all of the cost of the debasement there.
The other major currency, the Yen, is aggressively being debased by the Japanese government, because it's bankrupt and can no longer afford to pay the interest on its debt. While simultaneously the Japanese people have stopped saving, in an economy that hasn't grown in 25 years; which means the government has run out of sources to borrow, forcing them into currency devaluation to reduce debt (hammering Japanese standards of living).
So there are the major competitors, all in terrible shape.
The US will do a lot of things before it allows the dollar standard to go away.
Just 5% interest on the US national debt would bankrupt the government (or wipe out social security or the military). Zero chance they just roll over and allow it to occur, much less actively sign on to such a thing.
Thank you for your well thought out reply, I appreciate it.
I still argue that using the dollar for country to country trade and commerce (where neither country is the USA) is in general not good for either country if they can negotiate a fair rate of exchange between their own currencies. This is letting market forces work as they should work. What we have in the USA with the Federal Reserve is far from free market capitalism (source: Katherine Austin Fitts (solari.com), and I agree with her - she compares our current system to Soviet era style central planning).
There are trading blocks that are increasingly trading in their own currencies and in a few cases there is not much my country (USA) can do about it. Recently there have been large trade and cooperation deals between China and Russia and I would bet that they will not be using the US dollar, similar to the BRIC (Brazil, Russia, India and China) trading block.
Unless anyone mistakes me for a pessimist, I think the long term outlook for the USA is pretty good. Our advantages are great natural resources and relative geographic isolation. In the future after we adjust to much of the trade in the world not denominated in the US dollar, I wouldn't be surprised if we don't end up in good shape again like we were in the 1990s.
There's no strong replacement for the dollar, and looking out over the next 20 years, there are none even on the horizon. An independent digital currency perhaps, but that would be outside the realm of the context you're talking about.
China is one of the most indebted nations on earth, even more so than the US, and the Yuan isn't a first tier currency. As they accumulate ever more debt, it's going to guarantee their currency is never trusted globally.
The Euro is practically ripping itself apart at this point, and always had to (unless they choose to go all the way as a union). After seven years of zero growth, the ECB has taken to debasing Euro members standards of living to reduce debt and artificially (and temporarily) juice the economy. Unlike with the US QE program, in which dollar inflation is substantially exported and others pay part of the QE cost, the Euro members will bear almost all of the cost of the debasement there.
The other major currency, the Yen, is aggressively being debased by the Japanese government, because it's bankrupt and can no longer afford to pay the interest on its debt. While simultaneously the Japanese people have stopped saving, in an economy that hasn't grown in 25 years; which means the government has run out of sources to borrow, forcing them into currency devaluation to reduce debt (hammering Japanese standards of living).
So there are the major competitors, all in terrible shape.
The US will do a lot of things before it allows the dollar standard to go away.
Just 5% interest on the US national debt would bankrupt the government (or wipe out social security or the military). Zero chance they just roll over and allow it to occur, much less actively sign on to such a thing.