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Love Affair With Dollar May Be Waning

by Don Dion

China's exit from the U.S. dollar may be underway as the nation reduced Treasury holdings by $25.1 billion in June. Treasury holdings are extremely unpopular with the Chinese people, including economists and investment professionals, and it was the investment and commercial banks that led the selling. The Chinese government shifted towards the long end of the yield curve with $22.6 billion in purchases. Today, a PIMCO portfolio manager joined the chorus of those expecting a lower U.S. dollar. While we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the U.S. dollar as a store of value even in the absence of a single viable alternative. Warren Buffett also warned of potential side effects from government actions, specifically higher inflation caused by the huge government deficits. Congress needs to find someone to buy its...

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