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**newpiknicker** · 09-22-2008, 04:52 AM

Originally posted by Darius871
I never said anything about "saving." Suppose in 2018 the Bank of China up and decides to take its abundant foreign exchange reserves derived from exports, and invest them in countries other than the U.S. (or in different portions of the U.S. market), where they could get a higher rate of return and/or lower risk of default than treasury securities? How would that choice so drastically "constrain" their ability to export? Well if they did that it would cause the value of the dollar to collapse. First, their currency is pegged to the dollar. Second, if they let it float or pegged it to something else they would get far less for their exports because of the decreased value of the dollar. So they really can't do that unless they don't have any further interest in exporting to the US.

09-22-2008, 04:52 AM	#6
newpiknicker Join Date Oct 2005 Posts 460 Senior Member	Originally posted by Darius871 I never said anything about "saving." Suppose in 2018 the Bank of China up and decides to take its abundant foreign exchange reserves derived from exports, and invest them in countries other than the U.S. (or in different portions of the U.S. market), where they could get a higher rate of return and/or lower risk of default than treasury securities? How would that choice so drastically "constrain" their ability to export? Well if they did that it would cause the value of the dollar to collapse. First, their currency is pegged to the dollar. Second, if they let it float or pegged it to something else they would get far less for their exports because of the decreased value of the dollar. So they really can't do that unless they don't have any further interest in exporting to the US.
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