Big Picture did a post referring to discussions by the G8 about the US remaining the reserve currency.
So basically the US remaining the reserve currency isn`t about a belief that the US is deserving of its place, but rather protection of the massive holdings of US dollars.
One thing, with the US holding the reserve currency status the debasement of the currency has been hidden or delayed. I would suggest that there is a far greater debasement of the currency then people realise. Because of holding of US dollars it means the dollars are effectively not in the money supply, which keeps prices down and over the years the demand for US dollars also means the currency has remained stronger then its foundation.
So, there are two ways the currency goes down in price from this, first is the reduced demand to continue buying US dollars and the second is more come back as holdings are reduced. Without the constant removal of US dollars from the system price will eventually reflect the money supply that is out there.
The US still has an advantage that its debt is in its own currency. This is huge compared to other counties that got themselves in trouble and the price of their currency went down to debt ballooned without any further borrowing. The price of the US dollar goes down and it is the holders of this debt that take the hit, which is why I think interest rates will have to go up. There is too much risk holding US debt.
This is where treasuries, especially long term treasuries, plummet in value. I wrote about treasury bonds last year in Stop What You Are Doing Moment. I did a calculation and found that if rates went up to 10% treasury bonds that were supposed to yield around 4% would lose more then half their face value.
No kidding the G8 doesn`t want to get rid of the US reserve currency status. What they want is to rid them selves of US holdings first.