Monday, June 8, 2009

Talk is Cheap

China puffed its chest out with a call for a "new reserve currency." Never minding the fact that China was never forced to buy dollar-denominated assets with its surpluses, and a collapse of the dollar appearing to be most harmful to US creditors, there is some interesting analysis from Free Exchange. Developing countries' actions belie the notion that they are not willing to finance our debt. It's even less clear that our total net external debt is increasing (public debt is increasing but private debt is decreasing). If emerging markets do have "a greater incentive ... to move to a new system," the question I ask is: move to what, and how?

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