It's become somewhat of a national pastime to worry about the fate of the U.S. dollar. After all, the greenback is down 35% from its 2001 high. And it's down more than 52% from the all-time high it reached in 1985.
These concerns have found new life recently in the wake of the Federal Reserve's decision to print an additional $600 billion under the guise of a second round of "quantitative easing" -- dubbed QE2 -- following last year's $1.7 trillion money-drop operation designed to kick the economy into gear.
Since Fed Chairman Ben Bernanke first alluded to QE2 back in August, the dollar has lost nearly 7%, posting all-time lows. Investors were driven to move assets away from the dollar out of fear that Bernanke, who has a fanatical focus on fighting deflation, would follow the steps he outlined in a 2002 speech by printing excess money to devalue the dollar and push inflation higher. (Read "Hiking inflation won't help, Ben" for more on this.)
The international community was outraged; it has a vested interest in a strong dollar. Leaders at this month's G-20 meeting in South Korea-- a financial conference of the 20 largest economies in the world -- railed against the Fed's move.
More generally, there is a nagging fear that the dollar is losing its place in the world as it comes under attack from enemies at home and abroad. So is the dollar dying? And if it is, is that a problem?
How a strong dollar has helped you
The simple fact is that Americans have benefited greatly from the dollar's role as the global reserve currency. Such status funnels the world's savings into the country, keeping interest rates lower than they would be otherwise. One study (.pdf file) found that foreign purchases of U.S. Treasury debt -- the preferred investment for idle dollars -- reduced long-term interest rates by about 1%.This may not seem like much, but consider this: The Fed's epic $1.7-trillion money-printing operation last year is believed to have shaved only 0.5% off interest rates. The $600 billion QE2 operation likely will accomplish even less.
These actions subsidized all manner of credit-based spending, both by the government (President George W. Bush's tax cuts, President Barack Obama's stimulus package and the accumulation of the $13.7 trillion federal debt were all enabled by overseas savings held in U.S. dollars) and by households (foreign demand for mortgage-backed securities powered the housing boom and bust). So the dominant dollar helped the average citizen enjoy an era of low taxes, cheap credit and heady government spending.
The new reality
The pressure to end this era will only increase as France assumes the chairmanship of the G-20. French President Nicolas Sarkozy wants to have a serious discussion on the future of the international monetary system. He has frequently spoken out against the dollar's status as the world's reserve currency and its role in contributing to global credit and trade imbalances -- factors that contributed to the 2008 credit crisis.In Sarkozy's words, "what was true in 1945 can no longer be true today," referring to the post-WWII agreements known as Bretton Woods. That system secured the dollar's role as the linchpin of the global exchange-rate system.
But the realization of this vision depends on many things and won't happen overnight. So for now, the dollar's place is secure. But that means problems as well as benefits for the U.S.
Christmas is coming, how you are going. Gift ready. 
Doubtful, but good luck!