Since the economic collapse that transpired in 2007 and 2008, many have forewarned the inevitable destruction of the United States dollar, the most held currency in the Allocated Reserves, which is also followed by the euro and a few others.
As time has passed and the Federal Reserve has printed enormous amounts of money since the Great Recession started with such policies as quantitative easing and Operation Twist, the world has looked to other safe havens, whether it be gold and silver bullion or an alternative currency.
One of the measures taken by the International Monetary Fund (IMF) is to consider classifying the Australian and Canadian dollars as reserve currency assets, according to the Composition of Foreign Exchange Reserves survey.
The IMF will be inviting member nations in March of 2013 to include Canada and Australia in statistics by countries that hold reserves on the summary of their respective central bank’s foreign exchange reserves. The shares of foreign exchange reserves have risen from one percent in 2002 to 5.3 percent in 2012. The approximate amount of the global central bank reserves is $10.4 trillion.
It is expected the technical-sounding steps will cause an impact on the equity and world bond markets in the long-term.
With the IMF announcement, the official list of recognized reserve assets will now be expanded from five to seven: the dollar, euro, Japanese yen, Swiss franc, sterling, Australian dollar and Canadian dollar.
Both the Australian and Canadian dollars are some of the globe’s commodity and resource-rich currencies. It is projected that foreign central banks hold as much as $60 billion worth of Canadian dollars and another $60 billion in Australian dollars. It is countries that are non-Group of Seven states that hold the loonie, including Switzerland, Russia and nations in Asia and Latin America.
Interest in the Canadian dollar has been growing since 2008 when Canada stood as one of the most stable nations in the world following the financial crash. Bank of Canada Governor Mark Carney has been lauded for his low interest rates policy and other monetary actions, including giving Canadian banks $114 billion in bailouts.
It was confirmed Monday that he will be stepping down as head of the central bank in order to take the top job at the Bank of England next summer.
“It’s a reflection of reality,” said Bank of Montreal economist Benjamin Reitzes in an interview with the Globe and Mail. “Central banks around the world have recognized that Canada is a place they want to hold some assets. They are already here.”
During the trading session Tuesday, the Canadian dollar gained 0.5 percent to 99.63 cents per U.S. dollar. One loonie purchases $1.0037USD.
Those who have warned for years about the demise of the dollar say central banks will soon sell off the U.S. greenbacks in exchange for other currencies and gold. There have already been signs of this occurring, including China not increasing its foreign holdings of the U.S. dollar in September, the Korean central bank has been purchasing large quantities of gold and other central banks in Asia are purchasing silver.
In an interview with the Business Insider in May, Peter Schiff, president of Euro Pacific Capital and former Republican Senate candidate, explained that the only reason the dollar has not collapsed is because there has been a false notion that Europe is in an even worse crisis than the U.S., which he said simply isn’t true.
“We are exacerbating our problems,” stated Schiff. “We are going deeper and deeper into debt. It doesn’t mean that we’re not going to have a day of reckoning. It just means when it comes, there’s a lot more to reckon with.”
During the summer of 2011, retiring Texas Republican Congressman and three-time presidential candidate Ron Paul warned about a potential dollar collapse, which would lead to economic instability, surging interest rates and eventual martial law.
“These recessions off and on for the past 30, 40 years, they’re going to be minimal compared to the conditions that have been created by the world fiat system, principally run by our Federal Reserve,” explained Dr. Paul in an interview with CNBC (via RonPaul.com). “So it’s not a domestic affair, it’s not a U.S. affair, this is a worldwide affair. And I think that we’re in for very, very devastating changes. I think we will see changes in our economy and our country almost equivalent to the change that occurred with the Soviet system.”
As Dollar Collapse noted, the U.S. will finally be held up to the same economic laws as inferior countries. The U.S. will experience the fate of depression by its own persistent policies: further in debt and excessive money printing.