[kinoxi]

The problem is, by shifting our debt burden to the world, we are screwing our trading partners and threatening the status of the USD as the world's reserve currency. We receive innumerable benefits from this privilege. And if the world turns its back on the greenback, they will have no choice but to dump their worthless dollars into US assets, which will cause domestic prices to skyrocket.

It could be argued that they initially shifted their debt burden to us and this is a naturally occurring 'balance' being found. The chicoms (Yuan) have been intentionally undervaluing their currency (shifting the debt burden to the US) for instance. The EU is digging a financial disaster for itself due to socialist policies and thus cannot in the short term replace the dollar. I don't see this situation as critical yet.

[oceanview]

the bottom line here is - China must be broken, their peg must be broken, it is the reason why the currency market cannot reach a natural equilibrium. this is why you see such an unprecendented high level delegation going to china.

[GodGunsGuts]

Greenspan is telegraphing a major fall in the USD. He is even warning us what to do about it:

Greenspan says expects more dollar weakness Mon Dec 11, 1:02 PM ET



Former U.S. Federal Reserve Chairman Alan Greenspan said on Monday he expected the dollar to stay weak for the next few years and will continue to drift down, weighed by the U.S. balance of payments deficit.

"I expect that the dollar will continue to drift downwards until there will be a change in the U.S. balance of payments," Greenspan told a business conference here via video-link from the United States.

"There has been some evidence that OPEC nations are beginning to switch their reserves out of dollars and into euro and yen," Greenspan said.

"It is imprudent to hold everything in one currency," he said, adding that at some point the dollar will be moving lower.

"That will be the experience of the next few years," Greenspan said.

Greenspan said markets were so sophisticated it was very difficult to forecast the short term direction of the dollar.

http://news.yahoo.com/s/nm/20061211/bs_nm/usa_greenspan_dc_1

[stefan10]

The EU or better the european countries are not a real player in this game.

The Euro countries did not really changed their dollar reserves and compared to the overall numbers we talk about these reserves do not really matter. The dollar is no reserve currency for most of the european countries and has never been in the last years or even decades.

The asians bought dollar and secured the dollar position with their reserves. Looking at the US current account deficit a dollar decline was more than clear and widely expected.

The Euro or Europe had and has no influence here beside the fact that it is natural for foreigners (to some degree) to buy euros if they want to lower their dollar reserves.

Someone posted here that countries might leave the Eurozone. I can assure you no country will leave the eurozone just the opposite will be true. In the long run all countries (including the UK) will have the Euro or at least will pack their currencies to the euro ( this would have the same result in the end).

The simple reason is that trade is much much easier, cheaper and with a lower risk within the Eurozone and so companies save a lot of money here.
And the pressure to adopt the ECB policy for EU countries that do not have the euro will increase over the years.

The same was true with the german mark. While countries like austria, the netherlands, belgium but also france and others still got their own currency they had to follow the policy of the german bundesbank because of the dominating position of the german mark ( the so called D-mark Block).