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You have to be careful about that sentence. The only other options is to sell $ for another currency. Anything that they buy things that are denominated in $ a
by qroshan 7y ago
You have to be careful about that sentence. The only other options is to sell $ for another currency.
Anything that they buy things that are denominated in $ are usually US imports hence goes back to the net export calculation.
Of course they can also use to buy global commodities like Gold, Oil which are denominated in $$, but that is just a proxy for selling $ in foreign exchange and using that currency.
So, logically only 2 options. Sell US $ in FX or buy US assets (Bonds, Stocks, Real Estate)
- largbae 7y agoExactly right. Also you need to think about the sheer amount of dollars that China and Japan have. There are only so many investments that can give you a return on 1 trillion dollars without significantly adding to the risk of losing the principal. Treasury bills are essentially no more risky than the cash that you trade for them.