It's time for a new global reserve currency

The United States is strongly fighting the replacement of the US dollar as the first global currency, which brings to mind the bitter fight Britain entered after the Second World War to stop the replacement of the sterling pound with the US dollar.

This is completely understandable, as the replacement would involve many important changes and developments. Yet, this matter is not optional, as decision-makers in Washington may presume - the first international reserve currency is determined by subjective circumstances that reflect the economic significance of the country in question and the volume of its commercial exchange across the world.

The US understood these changes after the Second World War, when its economy emerged unharmed, and it became the strongest in the world.

Things have changed now, especially due to the global economic crisis. The US economy is suffering. Germany has become the world's largest exporter in the past few years, followed by China.

Meanwhile, the US balance of trade has suffered multiple deficits, imports have increased considerably, while industrial production and exports have fallen. The case here is similar to the post-war era when the dollar came first in global financial transactions.

When the gap between wishes and reality is so wide, change becomes inevitable and just a matter of time.

The Russian Deputy Foreign Minister has called for an international conference to be held to discuss the launch of a global currency to replace the dollar as an international reserve currency.

Meanwhile Brazil suggested to China that Brazilian and Chinese currencies, instead of the US dollar, could be used for commercial exchange between the two countries. Accordingly, there have been increasing talks on re-pricing oil with currencies other than the US dollar. Many practical steps have been taken in this direction by some oil exporting countries.

Furthermore, there have been some attempts to de-link important currencies from the US dollar, and peg them to a basket of currencies.

Thus, the US dollar is being subjected to massive pressure to step down from the throne of international currencies, giving way either for another currency, such as the euro that is supported by the powerful European economy, or a new global reserve currency, to be agreed upon in post-crisis arrangements.

It is not easy for the US to accept these changes, since the dollar had been the master of currencies for over half a century. Furthermore, the US Federal Reserve Bank's control over monetary policy, including interest rates, payments, and dollar printing has allowed it to set global monetary trends.

All the US power and economic and monetary influence is subject to fade in the next few years which will result in the emergence of new economic and monetary powers. These powers will reflect the economic and commercial weight in international relations, and many countries can benefit from these changes.

As for the US, resisting the upcoming change is useless, since the global economy cannot continue to grow because of the conflict between the US dollar's monetary domination and the US's receding economic power and growing influence of other countries and economic cartels, such as the European Union and China.

Logically, the US must cooperate with the wishes of the international community and accept the new situation, as well as help create a more sustainable financial and monetary order, which can reflect the interests of all parties.

In this case, the US will constitute an important and powerful part of the new and more stable order.

This will reflect positively on the US economy, which was severely affected by taking monetary policies that did not mirror the strength of the US economy.

The writer is a UAE economic expert.