China's Super-Sovereign Reserve Currency Idea: Could the SDR Be a Reserve Currency?

China's Super-Sovereign Reserve Currency Idea: Could the SDR Be a Reserve Currency?

This I think is one of the more interesting thoughts on China's push to SDR's as reserve currency:

"Foley: In the short term the costs to the US of losing its role as the reserve currency would be significant as it would lose seignorage benefits and ability to borrow in its own currency. In the longer term, the U.S. would benefit as it would regain some control over its currency. A central currency would make it harder for one country to get into so much debt to another. If the currency was increased along with global GDP it could provide a steady store of value."

Although bitter medicine, the US dollar losing its place as the global reserve currency could actually benefit the US economy in the long-term because it would force the US to lessen its reliance on debt and increase its savings.

Yes, that would cut consumption and lower growth rates, but the growth that does occur will be more stable and sustainable.