So there's a lot of talk recently about the potential demise of King Dollar. That’s, by the way, a phrase I conjured up back in 1990, a little over 30 years ago, and it actually stuck. What I meant by that phrase is two-fold. 

First, it's incumbent on the U.S. government, no matter who's in power, to maintain the reserve currency status of the dollar. We have enjoyed that status since the Bretton Woods agreement reached in 1945 in Mt. Washington, N.H., following World War II. 

The arrangement was crafted by John Maynard Keynes, who through the force of his personality and brilliance got consensus agreement to peg the dollar to gold at an exchange rate of $35 an ounce. The rest of the world's currencies were then expected to peg their exchange rates to the dollar. Hence, gold became the North Star of the world's monetary system. 

It was the fixed standard of value, which is an old-fashioned virtue that I wish had continued to this very day, but, unfortunately, President Richard Nixon broke Bretton Woods and moved us to a system of floating exchange rates, which is how the world's monetary system operates today, for better or worse, but the dollar continues as the central unit of account for world trading of goods, services and financial markets. 

Quite simply, America is the world's most powerful economy and, therefore, it is appropriate and important that the American currency be the center of the world's financial system. We don't want to lose this privilege. 

Now, many people are suggesting that the dollar will be overturned as the center of the world economy and somehow replaced by the Chinese yuan, or renminbi, or some other currency consortium. That is most fanciful. Ain't gonna happen! At least not any time soon. 

The BIS — the Bank for International Settlements — reports that there is a roughly $6.6 trillion daily average transaction volume in U.S. dollars. In other words, roughly 90% of all goods, services and financial transactions and trading are based on the dollar. No other currency is even remotely close. 

CHINA, MALAYSIA TO DISCUSS ASIAN MONETARY FUND TO REDUCE DEPENDENCE ON US DOLLAR 

The euro is second. Japan is third. The British pound is fourth and China is a very far distant fifth, probably only about 1%. It's true that central bank foreign exchange reserves denominated in dollars have gradually declined from about 70% to just under 60% in the last 20 years, but central bank reserve currencies — that's really a theoretical notion. There is nothing wrong with diversifying the crown jewels of various economies. 

The point is, transactionally, King Dollar is still sitting on her throne. The Chinese yuan, or renminbi, is hardly used internationally. They constantly manipulate their currency. 

The communist government still uses capital controls, which really prevents any reliable investment, and there are very few international investment funds or other intermediaries because the CCP doesn't want them in their state-run economy. No, China's not really the problem in the currency world today, but here's another thought: We have met the enemy, and the enemy is us. 

So, if the U.S. government keeps overspending, over-borrowing, over-deficits, over-debt, over-money printing, over-taxing, over-regulating, then King Dollar will keel over and fall off her throne with a loud-sounding thud and, unfortunately, that seems to be the direction we're going in. 

Unfortunately, the dollar exchange rate against other major currencies has fallen about 15% since last October, and the price of gold — remember that old-fashioned standard of value? — well that price has spiked almost 20%, moving from about $1,600 to over $2,000. 

This, despite assurances from President Biden that he's really cutting the budget deficit, or similar assurances from Fed Chair Jay Powell that he's really tightening monetary policy to fight inflation. Part of the problem is that both of them are speaking with forked tongue and the markets don’t believe them. 

Another part of the problem is that there's no confidence in Biden economic policies. Leftist progressive policies of Modern Monetary Theory have failed, but Mr. Biden wants more of them, despite his failure. 

CLICK HERE TO GET THE FOX NEWS APP 

People don't want to hold dollars. That’s the problem. The solution? It's time to curb spending and borrowing, for starters. House Speaker Kevin McCarthy is crafting a solid Republican plan for debt ceiling related spending restraint and other pro-growth policies, including the H.R. 1 "Lower Energy Costs Act," and that's just the beginning. 

How about a return to a reliable standard of value to anchor the worth of the dollar? Did someone say gold? Did somebody say a commodity price rule? My final point is this: The best thing Congress could do is to take measures that would give us a steady, sound, reliable greenback and then put that in the same basket of economic reforms as budget restraint, lower taxes, limited regulations. In other words, a true economic prosperity agenda for the future. Just think about it: old-fashioned values. 

This article is adapted from Larry Kudlow’s opening commentary on the April 6, 2023, edition of "Kudlow."