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Archive for February 15th, 2010

Question for Mr. Mosler re US debt to China

Posted by WARREN MOSLER on 15th February 2010

Dear Mr. Mosler:

If the US debt with China is merely numbers on a “Reserve Account” at the Federal Reserve Bank,

China’s funds are either in a reserve account or in a securities account at the fed.

could China close its account at the Federal Reserve

The dollars exist only as entries on the Fed’s computer, and actual cash, which is the same data written on a piece of paper

or move its account from the Federal Reserve Bank to the Central Bank of China?

The central bank of China has a reserve account and a securities account at the Fed dollars can’t be anywhere else.

It could loan the dollars to someone else and hold their liability. And that loan transaction debiting China’s fed account and crediting the borrower’s Fed account

And if it did, what would the mechanics of such a move be and what would be the consequence of such a move?

Don’t see any of interest.

I hear news reports that China would like to replace the dollar as the international currency. Would this be the same as “closing” its account at the Federal Reserve Bank?

No, I’m not sure what it would mean. I don’t use those words, and when I ask others who do they don’t know either.

Thank you for your anticipated response. David DePasquale

thanks for your interest!

Posted in China, Fed | 81 Comments »