Dollar, default and Bretton Woods III
(Reuters) - As the dust settles on the global credit crisis, a new world financial order may be emerging - but one possibly more dependent than ever on the United States protecting the dollar's position as dominant reserve currency.
Odd as that may seem against a backdrop of Washington toying with a sovereign debt default, some economists feel there may be few other credible options.
Far from ebbing in importance, they reckon the dollar's role may even have to increase as a necessary home for a swelling "savings glut" fuelled by ageing societies and growing caution among developing nations about foreign capital dependency.
Deutsche Bank strategist Sanjeev Sanyal dubs this latest order 'Bretton Woods III' - the first being the post-World War Two gold standard that ended in 1971 and the second a symbiotic build-up of both U.S. deficits and dollar reserves and bonds by the export-fuelled emerging markets boom between 2000 and 2008.
Sanyal's key point is that a third iteration of these clearly unbalanced but potentially durable international systems is being driven by ageing demographics across the world that will drive savings higher and almost all economies toward surplus.
http://uk.reuters.com/article/2013/10/16/uk-reserve-dollar-analysis-idUKBRE99F04R20131016
