Published: Wednesday, 7 Oct 2009 | 1:22 PM ET

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Such great American humorists as Mark Twain, W.C. Fields and Will Rogers might have had a lot of fun with the current hysteria over the weak U.S. dollar.

Talk of the perils of dollar weakness has been exaggerated for three decades—and in that way are somewhat comical—while predictions of its demise as the reserve currency are premature.

The dollar saga is also the stuff of a short memory.

Two years ago, when oil was spiking and the Fed was  easing, the dollar was sinking.

In 1995, the twin deficits—trade and budget—had people thinking the dollar was down and out. Shortly thereafter a five-year bull-market for the dollar began and it hit record highs against the major currencies.

After the so-called 1985 Plaza Accord, in which the U.S. and its major trading partners agreed to the idea of a weaker dollar, sustained declines in the U.S. currency triggered alarms on Wall Street—and some say, helped contribute to the stock market crash of 1987.

The dollar is a symbol of national wealth but many economists say there is no direct correlation between the value of the dollar ad the health of a nation’s economy. (See Japan circa 1988-2009.)

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Concerns about he dollar may have more to do with strict supply-and-demand issues than anything else and right now there are too many dollars out there—which happens to be the case has more than not in the past decade.

When the world economy was falling off a cliff last fall, there were neither too many dollars nor U.S. Treasurys.

Albert Bozzo
Senior Features Editor
CNBC.com

Economic historians will remind us that the dollar surpassed the British Pound as the world reserve currency early in the 20th century sometime after the UK abandoned the gold standard and it became self-evident that there was a new superpower on the block.

America’s financial supremacy began around that time and though it is no longer what it used to be, it is still sizable.

For all of its size and consumer muscle, the European Union is still years, if not decades, away from claiming that role—assuming the E.U.., a relatively young and bold experiment survives.

It’s hard for a currency without a country—as national borders and defined political hierarchy —to be a safe haven.

In that context, and if size matters, then China is the most sensible heir apparent, but a lot of things will have to happen first, including a free-floating currency, some sense of democracy and an economy that is not essentially state-controlled.

But as one pundit once said to me, “Ask a Chinese peasant what currency he wants to hold. It’s the dollar.” Their expatriate friends and relatives also happen to hold them by the billions.

If natural resources matter, then Russia—the crude oil and natural gas leader—is a likely candidate.

Both Russia and China, by the way, have super-power potential.

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In today’s world, technology is also likely to be a determining factor. The last great industrial revolution was the Internet and that was largely a U.S. invention and export industry. The dollar surged during that period and capital happily flowed to the U.S.

Clean technology in the age of sustainability has the same potential. If the U.S. leads the charge as a growing number in Washington and Corporate America would have us do, they’ll be no worries about the greenback. That's right as in green.

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