Up until now, China has been willing to hold her recycled resources in the form of lowest-yield U.S. Treasury bills. That's still good news. But almost certainly it cannot and will not last.
Some day -- maybe even soon -- China will turn pessimistic on the U.S. dollar.
That means lethal troubles for the future U.S. economy.
When a disorderly run against the dollar occurs, I believe a truly global financial panic is to be feared. China, Japan and Korea now hold dollars not because they think dollars will stay safe.
Monday, June 15, 2009
Paul Samuelson on The U.S. Dollar
I came across this post from Paul Samuelson, a name known to all economist and economics students from his textbook and contributions to economic theory. His view is that, even with the optimism of the Federal Reserve, the current economic crisis may be nothing compared to the what happens when the Asian nations turn pessimistic against the U.S. dollar: