Inflation is the concern that is weighing on the minds of investors and world governments alike, and rightfully so.  With the United States printing money at will it is only a matter of time before the Dollar loses its status as the world’s reserve currency.  When this happens inflation and possibly hyperinflation could set in.

Here is what is currently going on.  The Dollar is currently the world’s reserve currency.  This allows the US to print money.  No other country has this luxury.  Every country in the world that wants to trade needs US dollars to do it with.  This creates a large level of demand for the Dollar.  If any country wants to buy oil for example they must first convert their currency into dollars before they can do it.  Therefore the US can print money because there is a demand for it due to trade.  If the Dollar loses its status as the world’s reserve currency the rest of the world won’t need Dollars.  Now if the world doesn’t need dollars they will all come back home to the US.  This will create a lot of excess dollars here in the US and inflation will set in, in a big way, especially because we are printing at an alarming rate (there are a lot of dollars out there).

Now here is where the real concern and focus should be.  China who is on the rise to becoming the world super power has started circumventing the use of the Dollar in trade with its partners.  In November, China and Russia penned a deal to use their own currencies in trade with each other, and they are looking to expand this to other nations.  Recently the World Bank President Robert B. Zoellick said that he believes that the world needs a more balanced reserve currency.  This will most likely be the Bancor or the SDR.  These two occurrences should be a warning to all of us that the dollar’s status is in question.  More of these types of events are sure to come.

The weakness in the Dollar is not in question.  Countries around the world are concerned with holding US Dollars, and you should be too.  If the US loses its status as the world’s reserve currency we will be in for a bout of inflation the likes of which this country has never seen.  Not to mention our ability to print money to sustain a recovery will be over as well.  This will create a dramatic shift in the standard of living that you and I enjoy.  The purchasing power of the Dollar will go way down and erode any savings anyone has.  This is the main reason why buying gold coins is so popular today.