Roubini on Chinese Reserve Currency

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(email exchange)

>   On Fri, May 15, 2009 at 9:22 AM, wrote:

>   Hi Warren. Roubini (the contemporary Dr. Doom) is suggesting this morning that
>   the Chinese currency should be the new global reserve currency.
>   Don’t you need a country that runs an external payments deficit (or at least not a
>   surplus)?

Helps a lot! Unless someone out there wants to get short your currency so everyone else can get long!

>   that also has deep and unrestricted capital markets?

At least not restricted to the point no one else can hold financial assets denominated in your currency.

The other big thing that helps is that they all want to export to you.

The word ‘reserve currency’ has come to mean others use it as their fx reserves?

If so, they first must want to have fx reserves, and the usual reason for that is to support their exporters to the region of the ‘reserve currency.’

So he’s saying China is scheming to be a major net importer? Doubt it, though that’s what I would do if I were them.