Since July, 63 percent of all new cash going into foreign central banks have been euros and yen not U.S. dollars. The greenbacks share of new cash, 37 percent, is far lower than its 66 percent share of 10 years ago. According to the International Monetary Fund, dollars currently make up about 62 percent of reserves at central banks. This is the lowest on record!

Additionally, the story has broken that the Persian Gulf states have met with leaders from China, Russia, Japan, and France to set-up payments for oil in currencies other than the dollar. Naturally, the story has been denied by several of the participants. But, from what I have experienced so far about Qatar living here for just the past 2 months, the Qatari government is very astute at acting in the nation's best interest. They are not going to make bad investments (accepting debased dollars for oil) in the long run and interrupt their own economic growth just because the U.S wants them to. A source of mine on the ground here in Doha has also indicated that the Gulf Cooperation Council (Kuwait, Bahrain, Qatar, U.A.E., Oman, and Saudi Arabia) which plans to institute a common currency in 2010, is currently debating whether that currency should float or be pegged to another currency. Apparently, the leading favorite for pegging is the euro. If this were to happen, overnight the euro would also become the currency of choice for purchasers of oil. None of these indicators are good news for the dollar and its future as the world's reserve currency.

It's no secret how we got to this place. The U.S. has been on a spending binge ever since Richard Nixon took us off the last vestige of the Gold Standard in 1971. Throughout, the term of George W. Bush the welfare / warfare state accelerated federal spending, and interest rates were kept very low by the Fed. Once the bills came due and the financial crisis hit, the politicians, especially the current president, and the money oligarchs at the Fed knew only to spend more money and lower rates even further to combat the emergency. See, they either never considered that these actions of theirs got us into the mess in the first place or they realized that since we were in a messy fix they needed to help their benefactors on Wall Street and the best way to do that was to pursue the same policies, but label it “stimulus” or “quantitative easing” to fool the masses. Only time will tell whether their chicanery has worked.

One thing is for sure, Fed chairman Ben Bernanke is between an overheated printing press and a hard place. If he raises rates and siphons trillions out of the economy he will burst the current Fed induced stock market bubble. Housing values will sink even lower to reach supply/ demand equilibrium. Unemployment will accelerate even more given the higher cost of money for businesses. If he maintains the status quo, which seems likely given his cowardice in the face of political consequences, the dollar will be finished as the world's reserve currency. He claims he has the tools and the know-how to siphon trillions of dollars out of the economy to prevent inflation once the recovery picks up. But, given the amount of money and credit the Fed has injected since the crisis began, and Washington's thirst for huge deficits, Bernanke would need to be more than a mere mortal to accomplish that.

Many may ask, well, what would be so bad about the dollar losing world reserve currency status? For one thing, demand for dollars will evaporate. Foreigners will not need them to buy oil and other commodities. Consequently, the Fed will no longer be able to simply print new money to cover the future debts of Congress' because no one will be interested in buying the Treasury bonds that support the monetization. Since demand for the dollar will be gone its value will drop precipitously and this will actually force our government to raise taxes and/or print money just to buy the necessities of a nuclear power and industrialized society – namely uranium and oil. In light of the amount of debt we already have and the future unfunded liabilities of Medicare and social security, the standard of living in the U.S. will be equivalent to Mexico's. One huge benefit would be the death of the welfare/ warfare state because merely put, “you can't get blood out of a stone.” But the loss of wealth will not be worth it.

In some ways the chairman of the Federal Reserve is the most powerful person in the world. He supplies the money the whole world uses to buy commodities. That distinction will soon come to an end. When it does Ben Bernanke will go down as the worst Fed chairman in history since the dollar collapsed because of his policies and on his watch. Congressmen Ron Paul R-Texas and Alan Grayson D-Florida are about to request that the Senate delay Bernanke's confirmation hearing for another term as Fed chairman until he releases more information pertaining to the many bailouts of the Fed in the current crisis. Instead President Obama should withdraw Bernanke's nomination altogether. It is possibly too late to stop the inevitable collapse of the dollar. Maybe Obama can find a competent hand to pick up the pieces when it happens?

Kenn Jacobine teaches internationally and maintains a summer residence in Haywood County, North Carolina. For a podcast of this post go to: The View from Abroad.