hanson001

Wall Street Breakfast: Must-Know News

"Banks have now repaid much of what they borrowed, with Bank of America (BAC) the latest to do so on Wednesday after it said it will repay the $45B it borrowed."

So if a bank says it will do something, it is as good as "taking it to the bank" ?

Wall Street Breakfast: Must-Know News

"The U.S. dollar is safe as the world's reserve currency for now, but China took the first step towards a new reserve currency by agreeing to buy $50B of the IMF's Special Drawing Rights."

From my understanding of SDRs, they are made up of a basket of currencies of which the U.S. dollar makes up around 45% of the basket. The IMF can change the weight of the dollar (in the basket) based on exchange rates. If you purchase these, are you really diversifying away from the U.S. dollar?

If China wants diversification of its reserves why not just buy the other major currencies in the basket (from Europe, Japan, and Great Britain) in the currency market? Is the IMF the new satan?

It makes no sense for China to desire a weaker dollar however. Like Japan, it's in their interest to have a strong dollar and thus great dollar reserves. This closes the trade imbalance loop and keeps their goods and services affordable to U.S. consumers, though I understand they worry about their dollar investments depreciating. Still what do you do? If I were China, I would purchase hard U.S. assets with that ocean of dollars. It looks like a perfect time for them to be shopping.