Our take on this is that there is NO question that the US dollar will lose its reserve currency status, and the Treasury and the Fed are aware of this.
The game being played now on the international stage, largely behind the scenes until recently, is with regard to what will take its place and how it will be implemented.
The talking heads on US financial television are largely talking their books even today, taking the position that nothing can replace the US dollar for the next fifteen years at least (Robert Altman-Bloomberg).
Most of the anchors and house commentators are just shallow, nervous in a giggly sort of way, and astoundingly naive which may be attributed to their relative youth and lack of relevant experience in anything beyond looking good and being often wrong but never in doubt.
The US and UK are pushing for Special Drawing Rights (SDRs) from the IMF as the replacement, with very minor rebalancing. There are those who prefer something that they feel is less neo-colonial, or at least more neutral, and reflective of a changing economic reality.
Much of what is hitting the news now is political jawboning ahead of the next realignment of the SDRs in 2010 after the recent summit in Istanbul to discuss this very topic that the news people in the US are denying ever even occurred.
"The basket composition is reviewed every five years by the Executive Board to ensure that it reflects the relative importance of currencies in the world’s trading and financial systems.The current composition of the SDR, as calculated in 2005, is:
In the most recent review (in November 2005), the weights of the currencies in the SDR basket were revised based on the value of the exports of goods and services and the amount of reserves denominated in the respective currencies which were held by other members of the IMF.
These changes became effective on January 1, 2006. The next review will take place in late 2010"
"The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold—which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods system in 1973, however, the SDR was redefined as a basket of currencies, today consisting of the euro, Japanese yen, pound sterling, and U.S. dollar."
"With effect from January 1, 2006, the IMF has determined that the four currencies that meet both selection criteria for inclusion in the SDR valuation basket will be assigned the following weights based on their roles in international trade and finance: U.S. dollar (44 percent), euro (34 percent), Japanese yen (11 percent), and pound sterling (11 percent)".
