World Bank president Robert Zoellick says the U.S. dollar's role as the world's reserve currency may be diminishing as a result of the financial crisis. Although he says the dollar will remain a major economic force, Zoellick says the balance of power is shifting. And as the global financial system evolves, Zoellick says other currencies, including the Euro and the Chinese Yuan could become increasingly attractive alternatives.
In the aftermath of the global economic meltdown, the head of the World Bank says the U.S. should not assume the dollar will always be the world's business currency. Speaking at the School of Advanced International Studies at Johns Hopkins University in Washington, Robert Zoellick says world finances are undergoing a seismic shift.
"The United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency," he said. "Looking forward, there will increasingly be other options to the dollar."
Among the options, Zoellick says the 16-nation Euro and China's Yuan --also called the Renminbi -- are quickly gaining acceptance.
Zoellick cites China's recent move to list foreign companies in its stock exchange as a step towards making the communist country a global financial powerhouse.
"China is making it easier for trading partners to do business in Renminbi, for example, through currency swaps. We are likely to see this shift in the world of investment as well," he said.
Zoellick also questioned the role central banks played in the economic crisis. And he injected himself into the Congressional debate over how much power the U.S. Federal Reserve should have -- saying the Treasury Department may be better suited to regulate the U.S. financial system.
"In the United States, it will be difficult to vest the independent and powerful technocrats at the Federal Reserve with more authority. My reading of recent crisis management is that the Treasury Department needed greater authority to pull together a bevy of different regulators. Moreover, the Treasury Department is an executive department and therefore Congress and the public can directly oversee how it uses any added authority," Zoellick explained.
Regarding the Pittsburgh summit last week for the world's biggest economies, Zoellick applauded the resolution making the G20 the premier forum for global financial cooperation. But to maintain legitimacy, Zoellick says the major developed and developing nations who make up the G20 must recognize the voices of the 160 countries left outside.
"It needs to help offer a hand to the poorest and weakest countries, the 1.6 billion people still without electricity and the 'bottom billion' trapped in poverty because of conflict and broken governance," he said.
Zoellick's comments come as the World Bank and the International Monetary Fund prepare to hold meetings in Istanbul next week.