It is apparent that people know that the future value of dollar-denominated debt will be diluted by inflation, and accordingly the dollar is losing quite a bit of its prestige.

In the past year, the value of euro notes in circulation exceeded the value of dollar bills. The euro has also overtaken the dollar as the main denomination of international debt issues.

At present, the dollar’s declining value is jeopardizing its position as the world’s reserve currency and standard of value. For the American government, this creates a number of problems.

Countries like Saudi Arabia are being urged to drop their peg to the greenback, and if they want to avoid importing U.S. inflation, they’d be wise to do so. Lack of financial clout also takes away one of the weapons with which the United States continually assaults the rest of the developing world — “by limiting [foreign] banks’ access to dollar financing … the US can damage such countries’ financial systems and make financing more expensive to obtain.”

The simplest way to prevent any further decline (25% vs. the Euro over the past 4-5 years) of the dollar against other currencies is to stop printing more dollars. This method is guaranteed to work, unless other countries begin contracting their respective money supplies. What’s more, is that so long as the Fed ceases to create more dollars, the value of the dollar should actually rise versus other currencies, assuming that they are inflating expanding their base.