Whither the dollar?

Posted By Blake Hounshell Thursday, October 2, 2008 - 12:46 PM Share

One of the odd paradoxes of the financial crisis is that, even though it began in the United States, the dollar is actually a beneficiary of the chaos. Why's that? Because investors still see Treasury bills as the safest harbor in a financial storm, which is why yields have been pushed so low.

George Mason economist Tyler Cowen weighs in further with an interesting point about China, which holds hundreds of billions of U.S. dollars:

As for this country, the Chinese now regard us as "battle tested."  We have been through some truly major bumps, yet no major U.S. politician has called for "not paying back the Chinese."  We've even guaranteed the $350 billion in agency securities held by the Chinese central bank and without a stir. I think the Chinese are shocked by that and in many ways they now trust their investments more than before, not less. [...]

 

Bush, Bernanke, Paulson -- we call them leaders.  The Chinese think of them as the customer service department.  I suspect the Chinese get straighter answers from them than we ever do.

EXPLORE:ECONOMICS, FINANCE
 

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