"China calls for new reserve currency" from the Financial Times indicates that our biggest debt holder isn't too fond of the currency it is held in - dollars (although not mentioned by name) and proposed a global currency controlled by the International Monetary Fund.
It would appear that China is clearly worried that their considerable holdings in US Treasuries will be devalued as a potential inflationary period will follow the huge printing of money to shore up the US economy - plans pushed aggressively by President Obama, Federal Reserve Chair Ben Bernanke and Treasury Secretary Timothy Geithner.
It would seem that China, which has a strict party hierarchy system grooming and promoting its leaders, has to be nervous over an inexperienced leader of the US who has run nothing in his life besides an American Idol political campaign.
In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.
Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.
“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC.
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