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Yes, I agree with you.But we have several basic differences upon the understanding of the concepts of expectation and solvency. |
"But, if the U.S. government keeps borrowing from abroad, and keeps spending like there is no tomorrow". In fact, US is not spending like "there is no future". It is doing so right because it believes it has an affluent, bright future. Only because it is confident enough to pay back, could the country shoulder on so many debts, although nobody doubts it's bad to the US, including Bush himself. And yes, Bush might be a retard, but his cabinet, think tanks, wealthy sponsors ... are not.
Second, "other debtor countries will gradually change mind, and may think U.S. dollars are not as good as say. ", yes, US dollar is depreciating. But like I said before, the absolute value of each unit of currency is nothing but a figure game. As long as dollar is easy to convert, as long as you can exchange it with gold, oil, and other goods, it is still a storage of value and means of transaction. It is back on to the psychological belief by people over the dollar. No matter how cheap it is, as long as it can be used to buy goods instantly, it is a good choice for forex reserve.
Third, I totally agree with your condemination on US' coersion over RMB appreciation. It would be a disaster if yuan rises dramatically in no time. About the central bank wholeselling its US dollar reserve, don't worry. It won't do so, as long as the dollar has the functions I mentioned above. There won't be such day that the People's Bank of China sells out its dollar reserve in one day, one month or even one year.
[ Last edited by zinc06 at 2007-1-12 03:54 PM ]