Last Call

The Telegraph's Jeremy Warner mourns the death of the dollar.

The challenge for a developing nation such as China is a rather different one. In China, the propensity to export and save is driven by an absence of any meaningful social security net, in combination with the legacy of its oppressive one child policy, which has deprived great swathes of the population of children to fall back on for support in old age.

What's more, most Chinese don't earn enough to buy the products they are producing, so in what has become the customary path for developing nations, they export the surplus and save the proceeds.

Yet even in China the establishment of a newly affluent, free-spending middle class may now have gained an unstoppable momentum. In any case, the country can no longer rely on American consumers to provide jobs and growth. It needs a new growth model, which means ultimately adopting the Henry Ford principle that if you want a sustainable market for your products, you have to pay your workers enough to buy them.

These trends – all of which pre-date the crisis but which, out of necessity, are being greatly accelerated by it – will eventually drive a move away from the dollar as the world's reserve currency of choice. As China takes control of its economic destiny, spends more and saves less, there will be less willingness both to hold dollar assets and to submit to the domestic priorities of US monetary policy.

None of this will happen overnight. Depressed it might be, but US consumption is still substantially bigger than that of all the surplus nations put together. All the same, that the dollar's reign as the world's dominant currency is drawing to a close is no longer in doubt.

And he's right. Sometime within the next decade, the dollar will cease to be the world's reserve currency. America will no longer be running the show, but the BRIC nations: Brazil, Russia, India, and China. Of those four, China's renminbi will end up being the strongest currency. With almost four times our population, China will eventually start outspending us worldwide, it's only a question of when the dollar collapses.

But it will collapse. It will be replaced, either by the renminbi or whatever passes for a UN global currency down the road. Either way, the US will lose its place atop the economic superpower mountain and our standard of living will be dictated not by us, but by other countries.

We may get our turn again. But I doubt it will happen in our lifetimes. China and India especially are just too big for us to compete with, and Russia and Brazil's resources will make them the major suppliers for China and India's workforces.

The economic engine of Earth will no longer be powered by America. It's already happening. The only question is how much of the end game of our decline we'll be able to choose. And with our current economy, the world has seen that depending on the American consumer is no longer a viable economic model. New markets and new consumers are coming. They will decide who lives and dies in the new marketplace, not us.

The hands of the clock are turning, folks. My generation will see our standard of living continue to drop, year after year. The American middle class that our parents were born into and our grandparents worked so hard to create will not be passed on to our children. We're already experiencing the new economic reality.

Get used to it.