Asia's Stockpiles of Dollars Pose U.S. Economic Risks

[LiviaOlivia]

http://www.latimes.com/business/la-fi-dollar6apr06,1,6876656.story?coll=la-home-headlines

Asia's Stockpiles of Dollars Pose U.S. Economic Risks
By Tyler Marshall
Times Staff Writer

April 6, 2004

HONG KONG — A massive buildup of U.S. dollars held by Japan, China and other Asian countries is fueling increasing unease among analysts and policymakers, who fear it poses risks to the fragile American economic recovery and global financial stability.
<snip>
But that's not all. Asia's dollar purchases also effectively finance the huge and growing U.S. budget deficit as central bankers in the region invest most of their dollars in U.S. Treasury bonds and other securities. They have done this with such gusto that Uncle Sam doesn't even have to offer higher rates to move the average $1.5 billion of Treasury securities it must sell each day to sustain the current year's deficit.
<snip>
Asia's "dollar habit" also poses other risks to Americans, experts say. By allowing the U.S. to pile up record deficits without having to pay the usual price of higher interest rates, Asia has effectively encouraged Congress and the Bush administration to amass even more debt.
<snip>
At one level, this represents a very real loss of U.S. government control over the national currency, one with genuine national security implications. Any carefully organized dollar sell-off by these countries or a traumatic event that stampeded them into panic selling could send the dollar — and the global financial system — into chaos.
Such a scenario, however, is widely dismissed as highly improbable because central bankers and government policymakers in the region know that, as the world's largest international dollar holders, they would lose more than anyone from an attack on the American currency.
<snip>

Researcher Hisako Ueno in The Times' Tokyo bureau contributed to this report.

[Dogmudgeon]

1. It's always somebody else's fault, isn't it?

The American economy is in deep doo-doo because it is being run by a gang of thieves and maniacs, and is headed by a cynical goon who driven by the belief that God has ordained him to institute the Holy Christian Empire.

Kublai Khan as a televangelist. Tamerlane weeping for the unborn at the base of a mountain of skulls. Tepes impaling every one of his countrymen in a town and bragging how he defeated the heathen Turk. And George Bush speechifying about freedom -- among his other "ironies".

Such men are not typically concerned with balancing the books.

--bkl

[whirlygigspin]

3. well said

Ever get the feeling we're all aboard the Exxon Valdez
while skipper W is asleep at the helm?
wait for the crash--oy...and how much is gold this week?

But don't expect any Republicans to take the blame, Ever.Never Ever.

[Art_from_Ark]

2. Interesting

Japan's yen is a freely-traded currency and the country's export industries are hurt when the yen rises above a certain level, so it is understandable that Japan has been buying up dollars (the 4% interest on T-bills is gravy). China's yuan, and Hong Kong dollar, on the other hand, are pegged to the US dollar, so China has other reasons for its buying.

7. Excellent point

I had never thought about that--the pegged yuan obviates the need for buying dollars.

What's going on here?

It would seem to me we are putting ourselves at significant risk to national security by accepting these large buys.

It's like selling the statue of liberty...?

[izzie]

4. I can not see the reason for all the debt.

Unlike the republicans and the point of keeping us broke to get rid of social programs does not seem well thought out. I guess it is like the family that just lives high on the hog with hopes of a better paying job next year or something.Congress does seem to have blinders on.

6. Here is the big fly in the ointment

All the while this debt is building up, the jobs which would otherwise arise to pay for it all are being shipped off.

It is truly unprecedented.

The models for the home and mortgage market are falling apart underneath us--it was all based on jobs being generated here for immigrants and white-collar workers.

[Name removed]

5. Deleted message

Message removed by moderator. Click here to review the message board rules.