Beet
Atlas Star
Posts: 28,914
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« on: October 05, 2012, 08:37:53 PM » |
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I'm still seeing it all over twitter.
If either the US or Chinese economies looked like they were in trouble, the net effect would be to increase demand for dollars.
China has about $2 trillion in dollar-denominated reserves, which is a drop in the bucket compared to the size of the world currency market. $5 trillion are traded every day on the forex market. The total forex dollar-denominated foreign reserves of the dollar reserve system are about $7 trillion. The entire $7 trillion, including China's share, is the result of US current account deficits, and also contributes to those same deficits. To reduce America's forex vulnerability, and physical vulnerability in general (to China but also to all countries), the US would have to depreciate the dollar until our current account came into balance, and maintain a policy of current account balance.
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