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"Big Bang" Takes Out the Dollar?


G20 to look very closely at world's reserve currency.

Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community.

While I certainly don't expect this week's G20 will result in a move to a new currency regime overnight, I think the increasing number of calls to dethrone the dollar as the anchor of the world's broken monetary system likely indicates this will be a key topic. And if so, it could dramatically increase the level of uncertainty around the dollar - which would obviously be bearish for the dollar versus its major rivals (especially gold).

And along those same lines, we saw a blitz of articles this weekend from those pushing the idea of moving away from the dollar, and hinting that the discussions at the G20 are indeed likely to include a focus on the dollar's role in the monetary system.

First, Russia's Arkady Dvorkevich, the Kremlin's chief economic adviser, chimed in again and reiterated its support for a new SDR-based system that includes gold. Then Russian President Dmitry Medvedev called for a widening of the reserve currency basket, and repeated Russia's interest in a new global reserve currency during an interview aired by the BBC on Sunday.

China claimed that its call for a global currency won "international backing" in its press, and Dr. Olarn Chaipravat, advisor to Thailand's Ministry of Finance, even predicted that China would soon develop the yuan into another reserve currency through a "big-bang reform" as part of its push to have an SDR-like currency replace the dollar as the world's primary reserve currency.

Even the Wall Street Journal picked up on all the chatter, publishing this "what if" article concerning the dollar's dethronement.

Lastly, the South African Reserve Bank said it would increase its gold reserves. Coincidentally, South Africa is also one of the countries supposedly backing a move to an SDR-based reserve system.

Where there's this much smoke, there has to be some sort of fire.

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