The $7 Trillion Problem
That Could Sink Asia
Nixon-Era's John Connally:
"It's our currency, but it's your problem."
This musing from Nixon-era Treasury Secretary John Connally is about to find new relevance in the coming U.S. debt limit battle .. Connally couldn't have foreseen how right he would be 42 years on as Asia sits on almost $7 trillion in currency reserves, much of it in dollars .. "Asia's central banks have been engaged in a kind of financial arms race after the 1997 crisis, stockpiling dollars as a defense against turmoil. That altered the financial landscape in two ways: One, Asia now has more weapons against market unrest than it knows what to do with. Two, Asia is essentially America's banker, with China and Japan having the most at stake .. It's time Asia devised an escape .. The Treasury should engage with its Asian counterparts in a cooperative, transparent brainstorming process to draw down their reserves without devastating markets. It's in the U.S.'s best interest to keep more of its debt onshore, Japan-style, by attracting greater purchases from cash-rich U.S. companies. That would make the U.S. less vulnerable to capital flights in the future .. If ever there were a time for a currency summit, it's now. Perhaps the International Monetary Fund or the Group of 20 can host the debate. Such high-level discussions would help Asia set goals and consider the mechanics and timing of reclaiming more of its savings. Only then will all those dollars start being the solution to Asia's challenges, not the problem."
LINK HERE to the essay 
No comments:
Post a Comment