China Calls For a New International Reserve Currency That Isn’t the Dollar (Again)
Dean Baker of the Center for Economic and Policy Research writes via Business Insider:
The NYT told readers that:
“Beijing has few options other than to continue to purchase United States Treasury bonds, Chinese officials are clearly concerned that China’s substantial holdings of American debt, worth at least $1.1 trillion, is being devalued.”
Both parts of this statement are wrong. Beijing has the option to stop buying dollars from its exporters. The reason that the government accumulates dollars and other foreign currencies is that it buys the currency from the companies who are exporting to the United States and other countries.
If Chinese officials were that concerned about it, they wouldn’t keep selling us their useless crap, thereby continuing the vicious cycle of being forced to “cash out” in Treasurys on the difference. If we as Americans were that concerned about it, we’d stop buying the useless crap. Like the “Presidents of the United States” mugs I bought this weekend, which happened to have “Made in China” stickers slapped on the bottom.
On Saturday, after S&P downgraded the U.S. credit rating to AA+ (pretty sure you guys heard about that), Chinese officials said Washington needed to “cure its addiction to debts” and “live within its means,” harsh words considering our living beyond our means has been the main driver of China’s explosive growth in the last decade. ““The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone,” read the statement, released by state-run Xinhua news.
“China, the largest creditor of the world’s sole superpower, has every right now to demand the United States address its structural debt problems and ensure the safety of China’s dollar assets,” it said.
Wrong. The Federal Reserve is the largest creditor of the world’s former superpower (that’s us), and according to them, we can’t inflate fast enough.
“International supervision over the issue of U.S. dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country,” Xinhua said.
Notice a pattern here yet? GAAP isn’t good enough, we need the IASB to tell us how to recognize leases. Now the dollar isn’t good enough. Not that it ever was, at least not in my lifetime or yours.
Better learn Chinese, people.