The dollar's been tumbling against the world's major currencies after U.S. Federal Reserve's plan to print out extra paper money. The trillion dollars needed for the plan bring the jitters to those dealing in dollars.
The Federal Reserve is once again stepping up efforts to save the U.S. economy, announcing that it will pump an extra $1 trillion into the U.S. financial system by purchasing treasury bonds and mortgage securities. The idea is to encourage economic activity by lowering interest rates including those on home loans.
Many critics say that printing that amount of money out of thin air will bring disastrous consequences and could lead to hyper-inflation and a plunge of the U.S. national currency. Many experts have gone on record saying that U.S. monetary policy has passed the point of no return when it comes to printing money. So the United States may end up having a stash of cash at home, when prices on basic products will jump significantly and leave people wondering what their money is really worth. The vivid example of the severity of hyper-inflation is Germany in early 1920s. Back at that time national paper currency had lost so much value, that people were literally burning it to stay warm. Economists warn, that the problem and the severity of that situation cannot be underestimated.
A panel of economic experts at the United Nations is scheduled to meet sometime next week. The economic experts are expected to propose that the world ditch the U.S. dollar as a reserve currency. Instead, the panel is expected to propose a shared basket currency, which means that the world, essentially the majority of international community is losing confidence in the strength and stability of the U.S. dollar.
Specialist Avinash Persaud, a member of the panel of experts, speaking to Reuters said he believes the world should create something like the old Ecu, or European currency unit, which was a hard-traded, weighted basket.
“It is a good moment to move to a shared reserve currency,” told Persaud.
According to reports, Russia is also planning to propose a creation of a new reserve currency to be issued by international financial institutions. This announcement is expected to be made next month, when G20 Summit will be held.