It’s not the best of times to let dollar reserves slide. International currency market chatter has gone full sentimental/speculative circle since the great crash of ’08 decimated financial markets. From the unquestionable dominance of the dollar, to talk of euro’s rising star, to the remnimbi one day rising to recognition, so much has happened. The European sovereign debt nightmare; and questions regarding the very survival of the single currency, possible reserve currency status being a far off thing. Then China began slowing, upsetting the entire bottoming-out trajectory of the world economy. Then the Indian industrial machinery began losing steam. And now, with growth returning to the US, however slowly, dollar is king again. There will be no other reserve currency, at least not in the near term; or the far term for that matter. Also, shale oil advances will radically reduce America’s dependence on gulf oil, shaving precious percentage points off that imposing deficit progressively.
The dollar is set to rally. These are definitely not the best times to lose dollar reserves. Yet regardless of currency market oscillation, our reserve condition has never been particularly impressive. It’s definitely never been well-planned. And whatever little planning does take place, there’s hardly ever an instance when targets are met. Truth be told, a healthy reserve position has become a rarity in our neck of the woods. Even when the trend is encouraging, there’s that nagging feeling that something must be about to give way.
Holding, and financing, the sovereign’s monies requires immaculate prudence, which is why serious capitals nurture sovereign wealth funds. Even with limited resources, it is possible to toggle crucial levers in ways that make investments fruitful. Unfortunately we are far, far removed from such a world.
