Bloomber columnist William Pesek reports that Asians Aren’t Dumping Treasuries Yet. The dollar was established as the world’s reserve asset by the Bretton Woods agreement, post World War Two. According to the agreement it was backed by gold (at least for other central banks), but after a tremendous bout of currency inflation, Nixon defaulted on this obligation rather than lose the entire US gold supply. The current monetary regime, a sort of ghost of Bretton Woods, still holds the dollar as the world’s most popular reserve asset, allowing US consumers to spend on foreign goods far more than they earn by selling to foreigners. The difference is funded by dollar-denominated debt, of which a big chuk is the federal deficit. Portions of the deficit are purchased by Asian central banks, who are accumulating vast hoardes of dollars from the trade imbalance, while attempting to prevent their currencies from rising against the dollar, which would threaten the competitiveness of their exporters.
Asians Still Holding Treasuries
