Resident Fellow  Desmond Lachman

In the Spring 2008 issue of The International Economy, Desmond Lachman was asked to respond to the question "Ten years from now, what will be the next great global currency?"

My money would be on the US dollar remaining the world's great currency ten years from now. It is not that I particularly like the US dollar's long-run external fundamentals. Rather, it is that I dislike even more the world's other major currencies' fundamentals.

The euro is presently the main contender for displacing the US dollar as the world's principal reserve currency. However, one has to entertain serious doubts as to whether the euro will survive in anything like its present form ten years from now. Can one really expect either Italy or Spain to endure the rigors of euro membership in the event of a major slump in their economies?

There are some observers who pipedream that the Chinese renmimbi might emerge as a major global currency along with a resurgent Chinese economy. However, they overlook the great fragility of the Chinese banking system. They also turn a blind eye to the collision course on which China is with the US and Europe on trade issues.

As for sterling and the Japanese yen, it would seem that the sun has long since set on these currencies and that there are no glimmers of any dawn on their horizons.

Desmond Lachman is a resident fellow at AEI.