The only problem with that being that we assume our position as world reserve currency will continue indefinitely.
Do you know what being the world reserve currency gets us?
1) Seigniorage. The Federal Reserve estimates that the US Government earns about $6 to 7 billion per year of additional seigniorage from the amount of dollars held overseas. That's the biggest, most quantifiable benefit, except that, relative to the size of our economy or even the Federal Budget, it's a rounding error.
2) Bragging rights. I guess some would put a price on chest-pounding...
3) Strong (aka, overvalued) dollar. You realize that this isn't necessarily a good thing, right? The dollar is and has long been overvalued, in large part because of its role as a reserve currency. On the upside, it means that we can import more cheaply (yay, $100 TVs from China!), and on the downside, it means that our exports are less competitive overseas. Why do we outsource so much? Because the dollar is overvalued. Why do we import so much stuff? Because the dollar is overvalued. Why do we run a persistent year-after-year trade deficit? Because the dollar is overvalued. Under normal circumstances, chronic trade deficits will weaken the currency, which makes imports more expensive, exports more competitive, thereby naturally restoring the trade balance--a chronic currency overvaluation thus necessarily also means chronic trade deficits.
The people who freak out about the dollar possibly weakening also often complain about how much of our industry we are losing to China. Well,
pick one. Because you can't have both. If having such a strong currency is so good for the country, why on earth would Beijing go through so much trouble to keep theirs artificially undervalued?
Anyway, if the dollar is to be displaced as the world's reserve currency because of this spat with Russia, what could replace it?
* Euro: The world's second biggest reserve currency. Except the EU and US are in lock-step over this Russia thing. Also, the European monetary union was a pretty dumb thing to begin with. A monetary union without a fiscal union and without the free flow of labor (setting up a common labor market doesn't change the fact that linguistic and cultural barriers severely restrict the redistribution of labor) is not a sound monetary union. And the Europeans are finally learning this lesson--a bit too late, though.
* Japanese Yen: Japan doesn't like Russia, either. And their economy still hasn't recovered from their financial crisis two decades ago.
* Chinese RMB: Do you know how much effort Beijing goes through to keep the RMB
undervalued (to boost exports), which includes a lot of restrictions on the use and foreign dissemination of their currency that would make the RMB very, very unpalatable for use as a reserve currency? Yea, that'll be the day.
* Russian Ruble: The Russian economy is a one-trick pony based largely on oil and gas exports. Energy prices go up, and Putin gets a ton of money that he can throw around to basically buy the love of the people. Energy prices slump, and the government loses its ability to afford such largesse, country goes into a slump, and Putin then needs stir up the nationalist fervor and redirect anger outwards to remain popular. Nobody in their right mind would use the currency of such a fragile and non-diversified economy as a reserve currency.
There simply aren't any currencies (except maybe the Euro) that can take the place of the Dollar. And, you know what? It would be
good for the US economy for the dollar to lose its status as reserve currency. $7 billion and a smidge of pride is a bargain-basement price to pay to fix our messed-up trade deficit problem and save US industry and manufacturing.