NYT: “The World Economy Is Becoming Wary of the U.S.”
From NYT: “Geopolitical factors and U.S. weaponization of the dollar through financial sanctions are causing central banks and other official investors to attempt to diversify away from dollar assets,” said Eswar Prasad, the former head of the International Monetary Fund’s China division. To see how this fits in with the rise in US interest rates, […]
A recent article in the New York Times highlights concerns about the world economy's growing wariness towards the U.S. The piece indicates that geopolitical tensions and the U.S.'s strategic use of the dollar, particularly through financial sanctions, are prompting central banks and official investors to seek diversification away from dollar assets.
Former head of the International Monetary Fund's China division, Eswar Prasad, pointed out that this trend aligns with the increasing US interest rates and the relative growth of debt held by the official sector compared to that of the overall public. Despite potential understatements in official holdings (as estimated by Brad Setser at $300-$400 billion for China), it is evident that Treasury reserves are not growing in tandem with overall public debt.
The report draws on reported central bank data, such as the IMF's COFER, which shows a decreasing share of US dollar reserves in foreign exchange reserves, even after adjusting for exchange rate valuation effects.
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