I clipped / edited this as I found it to be most interesting:
A common believe is that there is no credible substitute for the dollar – so the dollar is safe as the reserve currency.
Another believe is that it would take decades to replace the dollar (central banks need to have “some” assets that hold or increase in value right?).
Increase in value right? …………………………………………………………….obviously the dollar is not doing this.
In truth almost any other asset is a better reserve than the dollar. There is no need for every central bank to pick the same one.
Some believe that it would take the Gulf States many years to replace the dollar as the currency oil is priced in. This is a peculiar claim since Iraq and Iran switched to non-dollar sales in short order (Iraq before the war). As should be expected with a dropping dollar, Iran says it profited from switching to non-dollar oil sales. Other countries can see this and can just as likely – switch too.
Imagine that central banks currently had their assets as 60% Dollars and 30% Euros. If the value of the dollar were to drop in half, then they would have equal value in Euros and Dollars without changing anything.
For thousands of years gold and silver have been used as a store of value. Imagine a central bank with 10% in gold and 90% in dollars. If the dollar goes down by 2 and gold up by 5 it could suddenly have most of its assets in gold.
The point is that the dollar could be replaced as the dominant reserve asset even without central banks ever selling their dollars, just by it’s dropping in value. Several times in the past the dollar has dropped significantly in value in a just a few short years.
Why would now be any different?