The Chinese are warning the US again about the US dollar. As this article in the UK's Telegraph points out, the Chinese hold $744 billion in US Treasuries, Because the Chinese alone have increased their exposure by 50% in the last year alone, there may be a misperception that their appetite is infinite and inelastic. While they don't seem to be giving any signs that they will be sellers, they are also warning that our current efforts to print our way out of this mess could result a loss of global appetite which will lead directly to surging inflation, soaring interest rates and a deeper recession, and a collapse of the currency. The Chinese have suggested that these results will be as quick as any reversal in asset prices.
Whereas I have been a dollar bill for some time, I think that the risk of a US dollar collapse is now very real, if not inevitable. My concern is that countries worldwide are lacking fiscal austerity and respect for their currency. The article points out that the UK's pound may be in still more jeopardy and the EU has its own issues regarding the US (although the Europeans are sticking more strongly to fiscal austerity measures). So, I am not sure that the proper result is to run into other currencies or to put too much money in commodities.
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