THe entire article is worth reading, but the analogy that the greenback has been mismanaged — to the point it is valueless. I would much rather by a fiat 500 than a chrysler 500 — it is smaller, more stylish, cheaper and will hold onto its value.

The question is what will be the next reserve currency. I do not think the euro or the pound are candidates — the euro because of the comprimises the Germans have to make and the Pound because Brown has mismanaged it.

And the mandarins have only had their act together around the rembi in the last few years.

But I’d be short on the US dollar.

In ancient times, the solidus circulated far and wide. But it was a tangible thing, a gold coin struck by the Byzantine Empire. Between Waterloo and the Great Depression, the pound sterling ruled the roost. But it was convertible into gold—slip your bank notes through a teller's window and the Bank of England would return the appropriate number of gold sovereigns. The dollar is faith-based. There's nothing behind it but Congress.

But now the world is losing faith, as well it might. It's not that the dollar is overvalued—economists at Deutsche Bank estimate it's 20% too cheap against the euro. The problem lies with its management. The greenback is a glorious old brand that's looking more and more like General Motors.

You get the strong impression that Mr. Bernanke fails to appreciate the tenuousness of the situation—fails to understand that the pure paper dollar is a contrivance only 38 years old, brand new, really, and that the experiment may yet come to naught. Indeed, history and mathematics agree that it will certainly come to naught. Paper currencies are wasting assets. In time, they lose all their value. Persistent inflation at even seemingly trifling amounts adds up over the course of half a century. Before you know it, that bill in your wallet won't buy a pack of gum.

via James Grant Mourns the Loss of the Gold Standard – WSJ.com.