The next great global currency: TIE asked some of the world's key experts: "ten years from now, what will be the next great global currency?".

• Position: Discussion

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The Dollar

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The dollar will reemerge.

DAVID C. MULFORD

U.S. Ambassador to India and former Undersecretary for International Affairs,

U.S. Treasury

What goes around comes around. We have been around this loop before. The dollar will reemerge as the U.S. economy restores its position in the world.

The U.S. dollar will continue to be the dominant international currency.

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EDWIN M. TRUMAN

Senior Fellow, Peterson Institute for International Economics

The U.S. dollar will continue to be the dominant international currency in ten years. It is still the only true international currency; that is one that is used by parties that do not include U.S. residents. Do you see euro-denominated bonds issued in New York as dollar-denominated bonds are issued in London? Looking just at reserve holdings and considering only developing countries as the most relevant group, it is true that since the first quarter of 1999, the dollar's share has declined 10.6 percentage points in value terms, but in quantity terms the decline has been only 6.8 percentage points and the dollar's decline was at a faster pace before the dollar's peak in the first quarter of 2002 than since then. The dollar's quantity share in the reserves of developing countries is currently 38.5 percentage points ahead of the euro. At the recent pace of adjustment which has slowed since early 2002 during a period of substantial dollar depreciation, it would take the euro twenty-four years to catch the dollar and in ten years it would still be more than 15 percentage points behind.

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The dollar now, in fifty years the yuan.

DINO KOS

Managing Director and Head of Central Banks and Sovereign Wealth Funds, Morgan

Stanley Asia Limited, and former

Executive Vice President, Markets Group, Federal Reserve Bank of New York

The U.S. dollar will remain the primary reserve currency ten years from now. Over a longer time horizon, say thirty or forty years, the next great currency--barring calamitous policy missteps--will be the Chinese yuan. The longer period will be required to liberalize the Chinese economy, build up efficient money and capital markets, and foster the deep and liquid markets consistent with reserve currency status.

The United States will come roaring back.

JEFFREY E. GARTEN

Juan Trippe Professor of International Trade and Finance, Yale School of

Management

I expect that after some setbacks the United States will come roaring back. All the talk about the growing economic power of the European Union and China has some merit, but it is vastly overblown. The American economy will remain dominant, the U.S. capital markets the widest, deepest, and most innovative.

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The dollar is currently weak because of major blunders by the Fed.

STEVE FORBES

President and CEO, Forbes Inc.

The dollar will be the great global currency ten years from now. It is currently weak because of major blunders by the Federal Reserve, which has been printing too many greenbacks since 2004. That excessive money-making is why all commodities have surged. In mid-2003 oil was selling at around $25 a barrel. Even with India, China, and central and eastern Europe booming and even with political turmoil in the Middle East, Venezuela, and Nigeria, there is no way the real price of oil and most other commodities should have almost quadrupled. The political fallout from rising inflation will force the Fed and the next president to restabilize the beleaguered buck.

Then the dollar will again be king and all the talk of the need to diversify reserves into other currencies will fade away. In the meantime, though, the world will experience the unpleasant consequences, politically and economically, of the Fed's mistakes.

The dollar and the euro and the yuan.

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KARL OTTO POHL

Partner, Sal. Oppenheim Jr. & Cie., and former President, German Bundesbank

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Both the dollar and the euro.

BARRY EICHENGREEN

Professor of Economics and Political Science, University of California, Berkeley

International currency status is not a winner-take-all game. Only in exceptional periods like the era of U.S. economic hegemony after World War II, when only the United States had deep and liquid financial markets open to the rest of the world, has a single currency dominated international transactions. To be sure, incumbency is an advantage--in politics and in the competition for global currency status alike. But ten years from now is not too soon to imagine a situation where the dollar and the euro play roughly comparable global roles. My choice, therefore, is both the dollar and the euro, which are likely to cohabit through the first half of the twenty-first century, after which they may be challenged by the yuan.

The dollar and the euro.

PAUL DEROSA

Principal, Mt. Lucas Management Corp.

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The dollar will still be the preeminent global currency.

RICHARD N. COOPER

Maurits C. Boas Professor of International Economics, Harvard University

While the euro will grow in relative importance, especially in new members of the European Union and nearby trading partners, the dollar will still be the preeminent global currency in both official and private hands a decade from now, reflecting not only institutional inertia but also the strength of U.S. capital markets and the relative decline of Europe in the world economy.

The greenback.

PETER B. KENEN

Walker Professor of Economics and International Finance Emeritus, Princeton

University

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The dollar.

TADAO CHINO

Senior Advisor, Nomura Research Institute, Ltd., and former President, Asian

Development Bank

The dollar will remain first among equals.

HENRY J. AARON

Program Director, Economic Studies Program, Brookings Institution

Although other currencies will gain in importance, the dollar will remain first among equals because the U.S. economy will remain the most flexible and most secure in the world.

The dollar's dominance will gradually diminish.

MICHAEL J. BOSKIN

Professor of Economics and Hoover Institution Senior Fellow, Stanford University

Ten years from now, the U.S. dollar will still be the major global currency, although its dominance will continue to be gradually diminished. The problems currently besetting the United States financial system will have abated, although similar problems affecting other financial systems are not yet fully transparent either. I expect U.S. growth to again outpace Europe and Japan over the next decade, as the more difficult demographic conditions in Western European countries will combine with their high-tax welfare states to slow growth. Demography and minimal immigration will continue to slow Japan.

However, the fraction of global commerce invoiced in other major currencies, especially the euro, will grow. Witness the Areva nuclear deal with the Chinese payable in euros. It is more likely than not that real oil prices and the U.S. current account deficit as a share of GDP will decline. Nonetheless, the dollar will still be the most important international medium of exchange, and dollar-denominated assets will still be a relatively safe store of value, especially given political risk in much of the developing world and high taxes in Europe. But if the United States embarks down the path to a high-tax, bloated welfare state, the outlook for U.S. growth and the dollar will worsen.

The dollar now, the yuan in thirty.

MARC LELAND

President, Marc E. Leland and Associates, and former Assistant Secretary for

International Affairs, U.S. Treasury

The dollar will have problems. The euro will play a more important role but the dollar will still be the major world currency--not the "great global currency" but greater than any other. If you asked me to predict for thirty years from now, I might lean toward the yuan.

The U.S. dollar.

ANNE O. KRUEGER

Professor of International Economics, School of Advanced International Studies,

Johns Hopkins University, and former

First Deputy Managing Director, International Monetary Fund

The U.S. dollar is very likely to be the major currency ten years from now. While reserve holdings will probably be less concentrated in dollars than currently, the convenience of using the dollar as the common denominator for transactions is important, and likely to mean that international transactions will still be denominated predominantly in U.S. dollars. That, in turn, means that the attractiveness of holding U.S. dollars as a medium of exchange, along with the importance of the United States in the world economy, will continue to make the dollar the preeminent currency.

All the options are possibilities!

JIM O'NEILL

Head of Global Economic Research, Goldman Sachs International

All the options are possibilities! As someone who has been quite negative on the dollar for the past decade, it is obviously tempting to conclude that the dollar will be "down and out" and it will lose its predominant reserve currency status. However, many of the factors that have plagued the United States and the challenges facing the dollar are starting to improve, so I think it is dangerous to write off the buck, especially when we read about rapper Jay-Z and model Giselle Bundchen both wanting the euro.

If the desire for the euro has spread that far, then perhaps there is no one else left to buy it! Amongst other currencies, clearly the euro has already grown in importance, and it seems pretty inevitable that Chinese yuan usage is on the rise. So I suspect the future will bring something between "some formal or informal currency bloc" and "foreign exchange chaos." As a friend of the active investor, I sincerely hope the latter, or something close to it.

We are in an era of significant relative change. As I have written for years, there is dramatic need for major reform of the International Monetary Fund, the World Bank, the G7 and the G8. If we get dramatic reform in...