Super Committee Could Hurt Dollar's Reserve Currency Status
The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (TheStreet) -- The decisions of the Super Committee are likely to have more far-reaching implications than are currently envisioned, as the deliberations have been cast only in political terms by the media. There are, however, significant long-term economic implications.
As we have seen over the past couple of weeks in Europe, contagion can spread like wildfire. The bond yield spreads to U.S. Treasuries or German Bunds on all European peripheral country debt, and even on the debt of AAA rated (at this writing) France, have widened significantly and are displaying huge volatility depending on the day's headlines.
U.S. Debt Crisis: What's the End Game? ), there still exists a "flight to the lowest perceived risk" (formerly known as "flight to quality"), when crisis and uncertainty rear their ugly heads.
Benefits of Reserve Currency StatusThe rapid spread of the contagion in Europe should be a wake-up call to U.S. policy makers, especially the Super Committee. Any stumble or failure to propose something significant in the form of deficit reduction could further jeopardize the dollar's reserve currency status and bring the day of reckoning perilously closer. The Nov. 14 edition of Barron's (Enter the Yuan) set forth five benefits of reserve currency status:
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