Noble Prize Economist: US Dollar is Risky and Questionable

Columbia University professor and Nobel Prize-winning economist Joseph Stiglitz is the latest commentator to weigh in on the debate about the dollar, saying Friday that the US currency’s role as a good store of value is “questionable” and warning about the USD’s high degree of risk.

Stiglitz told a conference in Bangkok that the world needs a “global reserve system,” reports Bloomberg. Support from countries like China should ensure orderly discussions on a new reserve system, he added.

The dollar has lost 12 per cent since March 5 against an index comprising the euro, yen and four other major currencies - all the while, China, the world’s largest holder of forex reserves, Russia and the other Brics have been calling for a new global currency to replace the dollar as the key reserve currency.
The current reserve system is “in the process of fraying,” said Stiglitz, adding: “The dollar is not a good store of value. Right now, the dollar is yielding almost no return and yet anybody looking at the dollar has to say there’s a high degree of risk”.

Bloomberg quotes Pimco portfolio manager Curtis Mewbourne, who predicts the dollar will weaken as the US pumps “massive” amounts of money into the economy. But others, including David Woo, BarCap’s global head of forex strategy in London, argue that pessimism over the dollar’s prospects may be excessive and that its status as the world’s reserve currency is still intact.
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