Monday, August 13, 2007

China: We Won't Nuke the Dollar

You'll always see people who get their kicks by proclaiming that a particular crisis is the end of the world as we know it. One of the pieces of doom-and-gloom I've seen is the idea that the People's Republic of China is going to destroy the United States by selling off all of its dollar-based assets and plunging us into another Great Depression.

It's nice that the Chinese are promising not to do that, but the real reason not to buy the hype is down a little lower:
Leading Chinese economist Yu Yongding, the director of the Institute of World Economics and Politics under the Chinese Academy of Social Sciences, told Caijing magazine that China could not possibly diversify away from the dollar to other currency assets without substantially weakening the dollar, the results of which would not work in China’s interest.

In other words, the Chinese know full well that they'd blow up their export market by blowing up the dollar.

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