As the dollar falls against the euro, yen and other major currencies, China and other emerging economic powers holding lots of dollars and U.S. securities are crying foul, and for an end to the dollar’s central status in global commerce.

If they are truly disgusted, they should look to themselves for answers.

Since the end of World War II, the dollar has largely replaced gold as the reserve asset central banks hold to back up national currencies. The supply of mineable gold is too limited, and efforts to back up currency with gold would result in chronic shortages of liquidity and global deflation.

When a merchant moves goods, for example, from Thailand to Mexico, the market for pesos into bahts is thin or nonexistent, and the merchant sells pesos for dollars to buy bahts. Similarly, many other cross-boarder trades, financial contracts and debts are denominated in dollars, although the euro is coming into greater use.

Over the years, governments and traders gravitated to the dollar, because the United States has the largest and most diversified economy. Virtually anything made or grown around the world is made or traded in the United States, and money invested in dollars is secure from political upheaval and state confiscation.

Until recently, the dollar has been a well managed currency. The U.S. government resisted the temptation to borrow too much and flood the world with too many dollars and Treasury securities, which provide liquidity the same as do dollars.

The current market determined system of exchange rates emerged by default in the early 1970s, when the Bretton Woods system of government-enforced fixed exchange rates failed, and the United States ended the convertibility of the dollar into gold.

This system has no rules or effective governing structure. Consequently, some governments seized opportunities to manipulate the system to gain competitive advantages in trade. For example, since 1995 China has maintained an undervalued currency by selling huge amounts of yuan for dollars to merchants and currency traders.

The undervalued yuan makes Chinese exports artificially cheap and foreign products too expensive in Chinese markets. China enjoys huge trade surpluses that create millions of jobs and double-digit growth in China. Japan and others have pursued similar strategies.

These policies impose huge trade deficits and unemployment on the United States, create enormous imbalances in the global economy, and contribute importantly to the Great Recession.

The U.S. trade deficit grew from about one percent of GDP in 2001 to more than five percent from 2005 to 2008, and this should have created a shortage of demand for U.S. goods and services and a recession.

However, China invested the dollars obtained suppressing the value of the yuan to purchase U.S. securities. U.S. consumers borrowed those dollars, against their homes and on credit cards, and kept the U.S. economy going.

Finally, the credit bubble burst and an even bigger recession resulted. Huge federal borrowing is now required to finance massive U.S. stimulus spending, bailout banks and otherwise rescue the U.S. economy.

All this borrowing floods capital markets with Treasury securities, which provide the same liquidity as dollars, and pushes down exchange rates for the dollar against every major currency except the Chinese yuan. This reduces the value of the dollars, as expressed in euro and yen, held by China, Russia, Saudi Arabia and others.

Hoisted on the consequences of their own mercantilism, China and others would like to see the dollar replaced by a basket of currencies.

A global currency poses enormous diplomatic and technical challenges, including creating an international body to control its supply and persuading governments to issue debt denominated in this global currency. Without those, private merchants and financiers would still seek a central national currency to facilitate trade and denominate private cross-border contracts and debts.

Even with a global currency, China could still buy dollars with yuan to keep its value suppressed against the dollar and boost exports into the United States. The United States would still have to run large federal deficits to avoid economic meltdown.

China would still be stuck holding dollars that chronically fall in value against other currencies.

If China and others want that problem fixed, they need to abandon currency manipulation and let their populations purchase more U.S. goods and services.

The U.S. economy would grow robustly, federal borrowing would subside and the threat of too many dollars compromising the dollar’s role in international finance would vanish.

Peter Morici is a professor at the Smith School of Business, University of Maryland School, and the former Chief Economist at the U.S. International Trade Commission.

Poor compensation practices on Wall Street encouraged dangerous risk taking. The time is right to reform pay.

The FDIC, with limited resources, is merging insolvent banks into somewhat stronger banks by agreeing to absorb huge losses.

With home sales rising, new cars flying off lots, and Wall Street profits soaring, analysts see an imminent recovery, but the economy is running on steroids.

Health care costs at least 50 percent more in the United States than in Canada and Western Europe, because of expensive malpractice suits, inefficient insurance company bureaucracies, comical inefficiencies and dangerously low standards at many hospitals, and doctor fees and drug prices much higher than abroad.

Politics and patronage are getting in the way of sound economic and prudent economic budget policies.

On health care and other critical issues, President Obama continues to presents choices as either his way or the failed ways of the past. That is silly.

Obama’s Stimulus bill doesn’t fix what ails the economy. Instead, he must resurrect manufacturing, which requires exporting more and importing less, and shift idle construction workers from housing, which is in oversupply, to rebuilding schools, roads, hospitals, and factories.

Money spent on Chinese coffee markers and Middle East oil cannot be spent on U.S. made products, unless offset by comparable exports. The resulting shortfall in demand for U.S.-made goods and services is a significant cause of the recession and why the economy needs huge stimulus spending and budget deficits to keep going.

President Obama has proposed sweeping changes in financial market regulations. Among these, a proposed systemic regulator and a federal resolution authority for large troubled institutions are not likely to help avert or resolve future crises.

Some good news from the labor markets, slowing job losses, is a good sign that a modest recovery is under way. Wall Street, eager for good news, is poised for a robust rally. Clearly, the economy must stop shedding jobs for the recession to end, but a slowing pace indicates the bottom is near. Consensus forecasts are that the economy will begin to grow again slightly in the third quarter.

Some good news from the labor markets, slowing job losses, is a good sign that a modest recovery is under way. Wall Street, eager for good news, is poised for a robust rally. Clearly, the economy must stop shedding jobs for the recession to end, but a slowing pace indicates the bottom is near. Consensus forecasts are that the economy will begin to grow again slightly in the third quarter.

Data on March sales of existing and new homes and durable goods orders will be released over the next few days. These indicators rose in February and could again signal that the beginnings of a recovery are under way. Yet caution still rules the day.

Data on March sales of existing and new homes and durable goods orders will be released over the next few days. These indicators rose in February and could again signal that the beginnings of a recovery are under way. Yet caution still rules the day.

Data on March sales of existing and new homes and durable goods orders will be released over the next few days. These indicators rose in February and could again signal that the beginnings of a recovery are under way. Yet caution still rules the day.

New housing data will likely cast a shadow on some of the recent evidence that the economy has bottomed out and is showing, as President Obama put it, “glimmers of hope.” Housing starts and new permits remain at recessionary levels. And the glut of unsold homes exceeds a 12 month supply. A figure less than half that would be considered healthy.

Americans watch Mad Money, subscribe to Morningstar and read more staid columnists, because investing is much more than putting up cash for the future. Like virtually every other economist, I have counseled players, pundits and parents for thirty years, you can’t beat the market.

Banks continue to suffer huge losses, but no one can calibrate how high bank losses will go, because no one knows how far housing prices will drop and how many loans will ultimately fail. Now Barack Obama must act pragmatically to fix the banks or the economy will sink under their weight.

To the extent stimulus packages expected to be enacted in the United States, Europe, and China lift the global economy, the reduction in the trade deficit will reverse. Oil prices will rise again, and with China increasing subsidies on exports, U.S. imports of consumer goods will soar.

The Federal Reserve has cut the federal funds rate and its short-term lending rate to banks to near zero, but those moves have done little to unlock credit markets. Conventional mortgage money and business loans remain too scarce, as regional banks, which are the arteries and capillaries of our credit system, remain short of loanable funds.