Canada.com (Link)
- Reuters - Patrick Worsnip (May 25, 2011)
The United Nations warned on Wednesday of a possible crisis
of confidence in, and even a “collapse” of, the U.S. dollar if its value against
other currencies continued to decline.
In a mid-year review of the world economy, the UN economic
division said such a development, stemming from the falling value of foreign
dollar holdings, would imperil the global financial system.
The report, an update of the UN “World Economic Situation and
Prospects 2011” report first issued in December, noted that the dollar exchange
rate against a basket of other key currencies had reached its lowest level since
the 1970s.
This trend, it said, had recently been driven in part by
interest rate differentials between the United States and other major economies
and growing concern about the sustainability of the U.S. public debt, half of
which is held by foreigners.
“As a result, further (expected) losses of the book value of
the vast foreign reserve holdings could trigger a crisis of confidence in the
reserve currency, which would put the entire global financial system at risk,”
it said.