In neither scenario does it make sense to hold huge amounts of dollar denominated assets today.

And that raises serious questions about the wisdom of China s massive investments in dollar denominated assets.

The actual budget increase cannot be determined simply by noting a change in the dollar denominated amount.

As a result, holders of dollar denominated assets should be looking forward to two alternative scenarios.

One might think that foreign investors would quake in terror at these terms and shy away from dollar denominated assets.

In November 2001, the authorities again restructured the public debt, this time exchanging dollar denominated bonds for domestic guaranteed loans.

Therefore, foreign speculators should, any day now, dump their dollar denominated assets onto the market, and so bring about the dollar decline that they so fear.

They continue to hold very large positions in dollar denominated assets, which they would not do if they thought the US faced a choice between a cheap dollar and a deep depression.

In 1994, Mexico shook the global economy when the extent of its domestic (but dollar denominated) debt in the so called tessobonos became apparent.

If rich country central banks can buy long term bonds, then emerging country central banks can buy dollar denominated bonds.

With everyone else buying, selling, and holding dollars, it pays to do the same, since markets in dollar denominated assets will be the deepest.

That will sharply reduce the pace of foreign exchange accumulation and cut into China s open ended demand for dollar denominated assets.

Yet the typical investor in dollar denominated assets whether a rich private individual, a pension fund, or a central bank has not taken the steps to protect themselves against the very likely dollar decline in our future.

Japan, China, and other export oriented East Asian economies are indeed eager to keep the value of the dollar relatively high, and their central banks have piled up close to 2 trillion in dollar denominated assets.

By plowing more than two thirds of its mammoth foreign currency reserves into US dollar denominated assets, China has gained significant political leverage.

Second, the costs of the insurance premium the outsize, largely dollar denominated reservoir of China s foreign exchange reserves have been magnified by political risk.

Second, the costs of the insurance premium the outsize, largely dollar denominated reservoir of China s foreign exchange reserves have been magnified by political risk. With US government debt repayment now in play, the very concept of dollar based riskless assets is in doubt.

At the same time, periphery countries held a lot of dollar denominated obligations which they had to repay when they could not roll them over.

With rebalancing will come a decline in China s surplus saving, much slower accumulation of foreign exchange reserves, and a concomitant reduction in its seemingly voracious demand for dollar denominated assets.

While China has taken minor measures to slow the increase in its dollar denominated holdings, it has been unwilling to risk a fully convertible currency for domestic political reasons.

China's government regards the threat of capital losses on its dollar denominated securities as less important than the need to maintain near full employment in coastal manufacturing cities like Shanghai.

Supported by a dollar denominated line of credit, the EPU s 15 Western European member states established exact dollar exchange rate parities as a prelude to anchoring their domestic price levels and removing all currency restrictions on intra European trade.

The principal risk I see today is that being borne by investors in dollar denominated debt and I don t believe they are charging a fair price for what they are doing.

Second, China s foreign assets are denominated almost exclusively in US dollars, while its foreign liabilities are denominated mostly in renminbi.

Many developing countries have made progress since the 1990 s in shifting from dollar denominated debt toward foreign direct investment and other types of capital inflows, or in paying down their liabilities altogether.

If the dollar is likely to fall against the euro over the next several years, investments in euro denominated bonds issued by the German or French governments may provide higher safe returns.

European and other international banks had acquired a lot of dollar denominated assets which they habitually funded in the interbank market as the market dried up, they were forced to buy dollars.

As a result, China s dollar denominated foreign exchange reserves, which account for the largest share of all the foreign holdings of US government securities, will suffer interest rate losses.

China has recycled about 60 of these reserves back into dollar denominated US government securities, because it wants to limit any appreciation of the renminbi against the world s benchmark currency.

Back in the 1970 s, there was some limited issuance of SDR denominated liabilities by commercial banks and SDR denominated bonds by corporations.

Once portfolio investors start selling their dollar denominated securities, a stampede will follow, causing the dollar's value to crash and triggering the first major global financial crisis of the twenty first century.

CIC chose to take a significant share in one branch, rather than a small share in the whole group, because doing so offered both a strategic advantage (access to energy resources) and a monetary benefit (investment in dollar denominated assets).

Domestically oriented macroeconomists look at the situation roughly like this at some point in the future, foreign central banks will become less willing to continue buying massive amounts of dollar denominated securities in order to prop up the greenback.

b Total public debt denominated in pesos and foreign currency.

All of this spells lasting damage to the credibility of Washington s commitment to the full faith and credit of the US government. And that raises serious questions about the wisdom of China s massive investments in dollar denominated assets.

The excess of saving over investment has given Japan a current account surplus, allowing the country to finance all of the government borrowing domestically, with enough left over to invest in dollar denominated bonds and other foreign securities.

The policy of making an allowance of 10 per cent of non United States dollar denominated outstanding accounts receivable as at 31 December as a provision for delays in the collection thereof, is discontinued effective 31 December 2003.

China recognizes that it no longer makes sense to stay with its current growth strategy one that relies heavily on a combination of exports and a massive buffer of dollar denominated foreign exchange reserves.

They would also incur losses on their claims and investments denominated in euros.

Acquisition security rights include those that are denominated as security rights, as well as those that are denominated as retention of title, arrangements and financial leases.

About 800 billion of China s foreign exchange reserves are invested in euro denominated assets.

These devaluations have done little to improve the situation of the Venezuelan people who rely on imported products or locally produced products that depend on imported inputs while dollar denominated oil sales account for the vast majority of Venezuela's exports.

Because SDRs are denominated in several national currencies, no single currency would enjoy an unfair advantage.

Of course, an earlier attempt was made to create a commercial market in SDR denominated claims.

Bank deposits, along with most other private and public debts, were denominated in that national currency.