Everywhere you look, markets are setting new records and going to new places.
US GDP is about $10 trillon a year or about one half of the global GDP so we have a big lead over everyone else but China is changing things very quickly indeed. Just look at that chart since Bush took office!
China's Reserves Near Milestone, Underscoring Its Financial Clout
October 17, 2006
Wall Street Journal
BEIJING -- Sometime in the next few days, China's holdings of foreign currencies and securities will top $1 trillion -- a sum greater than the annual economic output of all but nine countries. The rapid growth in these so-called foreign-exchange reserves has made Beijing a colossus in the financial world, cushioned against shocks at home, but potentially able to trigger them abroad.
How China manages its growing pool of wealth has major repercussions for the global economy. Beijing's reserves totaled $987.9 billion as of Sept. 30 and are growing by roughly $20 billion a month. That total compares with the about $1.2 trillion in assets under management at U.S. mutual-fund giant Fidelity Investments.
For the U.S., how China deploys its reserves is a question of some consequence. Most of China's currency reserves are invested in U.S.-dollar-denominated debt, such as U.S. Treasurys, which are considered the world's safest investment. That has kept demand for U.S. Treasury notes high -- and interest rates low. A change in that pattern could affect how much Americans pay for mortgage loans and other borrowings.
Some in Washington and in world markets fear that China might one day dump its holdings of dollar-based assets, setting off a tidal wave of sales that might swamp the U.S. economy. Despite such fears, there's no sign that China is making a major move out of dollars and into euros or other foreign currencies, even though Chinese economists have occasionally warned that the weak dollar holds down the value of China's holdings.
China discloses almost nothing about its reserves, beyond their awesome size. Roughly 70% of the Chinese reserves are believed to be in U.S. dollar assets, 20% in euros and 10% in other currencies, including the Japanese yen and Korean won, according to Brad Setser, an economist at Roubini Global Economics.
