China's Big Dollar Problem

Avatar:
Ben Cohen
Author:
Publish date:
Social count:
0

By Ben Cohen

Paul Krugman on China's sudden realization that investing in U.S Treasury Bills wasn't the smartest thing to do:

Two years ago, we lived in a world in which China could save much


more than it invested and dispose of the excess savings in America.


That world is gone.

Yet the day after his new-reserve-currency
speech, Mr. Zhou gave another speech in which he seemed to assert that
China’s extremely high savings rate is immutable, a result of
Confucianism, which values “anti-extravagance.” Meanwhile, “it is not
the right time” for the United States to save more. In other words,
let’s go on as we were.

That’s also not going to happen.

The


bottom line is that China hasn’t yet faced up to the wrenching changes


that will be needed to deal with this global crisis. The same could, of


course, be said of the Japanese, the Europeans — and us.