tag:blogger.com,1999:blog-5228675828988846905.post3745527950678467193..comments2023-04-10T03:04:23.685-05:00Comments on The Pursuit of Financial Happiness: Michael Pettis on Why China Needs to Buy United States DebtMichael J. Schusselehttp://www.blogger.com/profile/05843439166040743124noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-5228675828988846905.post-78100039930455698722011-08-11T15:39:22.991-05:002011-08-11T15:39:22.991-05:00Michael Pettis covers the purchase of hard commodi...Michael Pettis covers the purchase of hard commodities in scenario #3 in this discussion of how the global balance of payments between nations functions.Michael J. Schusselehttps://www.blogger.com/profile/05843439166040743124noreply@blogger.comtag:blogger.com,1999:blog-5228675828988846905.post-22405592801243309642011-08-11T13:24:52.385-05:002011-08-11T13:24:52.385-05:00That a country with a trade surplus must have a ca...That a country with a trade surplus must have a capital account deficit and accumulate either public reserves or private investments in foreign currencies is axiomatic. <br /><br />However, China does not need to be a net accumulator of Dollars. They can use the Dollars they earn in exports to the US to pay for Dollar-based imports such as iron ore, grain, oil, etc. China's commodity imports exceed its US Dollar exports. In other words if you sum China's imports and exports by currency denomination, there is actually no reason for China to accumulate reserves in USD- instead they would accumulate reserves in other currencies (though still the same amount of reserves).Anonymousnoreply@blogger.com