AFTER THE SCORCHING inflation that has hit even the strongest nations in the world, there is very little hope that the dollar can remain to be the world's reserve currency. One of the major contributors of the global recession was the collapse of the US Mortgage market from as early as the 1930’s. However, there are other factors that have led to incremental weakening of the dollar. These include the stimulus packages of the government, bailouts of finances, keeping lower interest rates with a weak economy, and higher cases of unemployment, among others. With all the factors, there are higher risks of global inflation. Currently, most nations across the world are feeling the heat of inflation with the hike in prices of fuel, food and other essential commodities.
With the weakening of the American Dollar, there has been a rise of other nations that are aiming at occupying the helm of the world's super power, one of which is China. Various emerging markets are posing further threats to the American Dollar. Looking back at the American Dollar, there has been significant devaluation. For instance, toward the last quarter of 2001, the US Dollar had approximately lost 37.9% of its power in purchase against the other currencies. With this kind of trend, there were clear indications that indeed, the American Dollar was on the verge of a major devaluation. Even through the beginning of the 21st Century, this sparked major problems in the market of the American Dollar, a problem that, even today, looks very far from over.
One of the major competitors of the American Dollar is the Chinese Currency. In case the printing of the American Dollar continues at its current rate of at least $600 billion, there are higher chances of the Chinese currency overtaking the American Dollar very soon. However, even with these indications, Washington still believes that the economy of the United States still needs to experience a little pinch of inflation. This is because it believes that with inflation, the prices of assets will be able to move higher and a majority of customers will be threatened to begin spending money now in the fear that in the near future, the prices will be hiked.
With Washington insisting that the US economy has to continue drowning in the flames of inflation, there are no clear signs of the dollar having any brighter future. On the contrary, China is viewed to be in need of the opposite of the demands of Washington. China is of the opinion that there should be a deflation through lowering of prices to enhance domestic consumption. China indicates that with increased domestic consumption, it will be able to offer its currency a greater purchasing power for its consumers. This will cause the Chinese Yuan to increase in value while the value of the American Dollar fluctuates due to a weaker purchasing power. It is predicted that in five years from now, China is going to become the world's leading economy, a situation that will lead to the ultimate collapse of the American Dollar.