How big a deal is the loss of the dollar’s reserve status?

As the dollar loses its reserves status, at least half of the world’s $5,385 billion dollar reserves will be sold off and replaced with other currencies (yuan, euro, khaleeji, gold, rand, etc…). The US, with its $71 foreign reserves, will not be able to do anything to counteract this mass exodus from the dollar. With outflows of this magnitude, the dollar’s value will collapse to a fraction of where it is now.

How about the total collapse of the US. Economic Armageddon, food riots, starvation and crime waves. How about the same for China, Japan, India and Europe. And that’s just for starters.

We may not have a lot here but we have a good distance from the helter skelter coming and we can grow our own food. Not bad.

In the last week we have learned that:

1) Fed is planning 15-fold increase in us monetary base
2) U.N. panel says world should ditch dollar

3) Zimbabwe has ditched the US dollar in favor of the rand
4) China and Russia rethinking the dollar’s status as world’s reserve currency

With the US monetary base expanding at a breathtaking pace and nations around the world worrying about the value of their US holdings, the dollar looks virtually guaranteed to lose its status as the international reserve currency. This begs the question: how big a deal is the loss of the dollar’s reserve status?

To answer this question, lets first calculate just how large are the dollar holdings of foreign governments. From the CIA’s world Factbook, below is a ranking of countries by reserves of foreign exchange.

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