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Yakk · 03-04-2005, 01:13 PM

KMA, right now asian governments are spending billions of dollars (by the 100s) per year buying American dollars (actually government bonds, which are 'zero risk' assets whose only risk is the currency risk). This props up the American dollar, allows the American government to spend money it doesn't have, and finances the American trade deficit, while simultanionsly forcing savings on their own people and depressing their dollar.

This is a temporary problem. It cannot be sustained.

The raw amount of money those national banks are pouring into US currency will start to expose them to ridiculous amounts of currency risk. Already many of them have started talking about diversifying their holdings (not selling! that could trigger a currency crash). But failing to continue to buy at accellerating rates is enough to prevent the continued level of the US dollar from being sustainable.

A person can choose to borrow against future earnings, or save up and invest.
A nation can choose to borrow against future earnings, or save up and invest.

The Asian economies are 'saving up and investing' by depressing their currency and building up an export infrastructure. It lowers their standard of living in the short term.

America is doing the opposite.

There isn't anything particularly wrong about either path. They both have consequences. Amoung them is it all ending in currency destabalization and chaos.

03-04-2005, 01:13 PM	#32 (permalink)
Yakk Wehret Den Anfängen! Location: Ontario, Canada	KMA, right now asian governments are spending billions of dollars (by the 100s) per year buying American dollars (actually government bonds, which are 'zero risk' assets whose only risk is the currency risk). This props up the American dollar, allows the American government to spend money it doesn't have, and finances the American trade deficit, while simultanionsly forcing savings on their own people and depressing their dollar. This is a temporary problem. It cannot be sustained. The raw amount of money those national banks are pouring into US currency will start to expose them to ridiculous amounts of currency risk. Already many of them have started talking about diversifying their holdings (not selling! that could trigger a currency crash). But failing to continue to buy at accellerating rates is enough to prevent the continued level of the US dollar from being sustainable. A person can choose to borrow against future earnings, or save up and invest. A nation can choose to borrow against future earnings, or save up and invest. The Asian economies are 'saving up and investing' by depressing their currency and building up an export infrastructure. It lowers their standard of living in the short term. America is doing the opposite. There isn't anything particularly wrong about either path. They both have consequences. Amoung them is it all ending in currency destabalization and chaos. __________________ Last edited by JHVH : 10-29-4004 BC at 09:00 PM. Reason: Time for a rest.