On 11/2/06, Sabri Oncu <[EMAIL PROTECTED]> wrote:
I don't think they are recycling their export dollars back to the US because they believe the USA is a better place to invest than outside of the USA. It is because of what came to be known in recent years as the "dollar hegemony." They usually do that by purchasing the US treasury bonds as the US treasury holdings of the East Asia demonstrates: China's US treasury holdings recently went beyond $1 trillion if I am not wrong and Japan's must be close to that too. The main reason why the US economy still able to breathe is the foreign holders of the US debt and other financial assets. If they let the US economy and together with it the US dollar collapse, their US dollar holdings will go worthless, which is a disaster for them too. If I were them I would buy real US assets such as land and other property with my dollars, as opposed to US debt and other financial assets, which would amount to a bloodless invasion of the US.
there's a collective action problem. An individual central bank would like it if the _other_ CBs were to hold on to their dollar assets, so it can dump them at a high price. Why is it that the simple economy prediction -- i.e., that they'd all rush to the exits causing a crash -- hasn't worked out yet? It it some kind of bubble? -- Jim Devine / "Mathematicians are like Frenchmen: whatever you say to them, they translate it into their own language, and forthwith it means something entirely different." -- Johann Wolfgang von Goethe
