China’s Big Dollar Problem

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.

Ben Cohen is the editor and founder of The Daily Banter. He lives in Washington DC where he does podcasts, teaches Martial Arts, and tries to be a good father. He would be extremely disturbed if you took him too seriously.