More Evidence that We Aren't Out of the Woods Yet

A recent Wall Street Journal Article discusses calls by academic economists at the American Economic Association annual meeting for even stricter reforms on the banking sector beyond what has already been done. Obviously, the experts are suspecting that persistent weakness in the US banking sector provides plenty of reason to suspect that a further bursting of the liquidity buble is possible.

Take this in consideration with a recent post by former IMF economist Barry Eichengreen who points out that internationally there still isn't a significant fallback option for the international monetary system.

Eichengreen notes that the fall of Ireland is spreading contagion, more importantly, he notes elsewhere their "rescue package" is inevitably going to come back to them, adding more stress to the EU banking sector. To top this off, austerity in the rest of the Union will keep economic growth meagre at best and ultimately will prevent the Euro from usurping the USD as the global dominant currency.

He notes that there may be some room for the Canadian Loonie and the Australian Dollar to absorb some of the excess foreign investment but that the majority of it will remain in the US, largely for lack of an alternative place to settle.

That said, if the USD is the best currency available and the reforms called for by the AEA ring true to the continued fragility of the US, what does this say for the next 10 years of global economic recovery.

Perhaps its time to start pushing alternative monetary schemes as a failsafe in the case of another monetary meltdown. Even though it's still viewed as unsustainable, a nation-wide development of regional or local currencies may provide a fallback measure and encourage local cooperation should the current global market crash again.

What are the other options?

Clearly, there are more questions than answers