U.N. sees risk of crisis of confidence in dollar
"The United Nations warned on Wednesday [25 May 2011] 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 . . . the U.N. economic division said such a development . . . would imperil the global financial system."
The report, an update of the U.N. "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.