http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_pesek&sid=aKmRPPpmFAfg-snip-
The group is a formidable crowd, considering it holds well over $1.1 trillion of U.S. Treasuries. In fact, if Federal Reserve Chairman Greenspan is wondering why his recent rate increases aren't working out as planned, he need only look to the East.
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Yet when Korea, the world's fourth-biggest holder of reserves, last week suggested it might diversify into other currencies, markets plunged. When the Bank of Korea said it would hold onto its dollars, markets returned to normal, satisfied that the mighty U.S. had again prevailed over compliant Asian economies.
Nothing could be further from the truth. Korea's about-face merely shows the bind Asian officials are in. They risk a big hit to public finances by publicly selling a currency that has lost 34 percent versus the euro in the three years through 2004. Their economies also become less competitive as currencies rise against the dollar and the Chinese yuan, which is pegged to the dollar.
Undermining the dollar isn't in Asia's interest in the short run. In the longer run, though, it's absolutely in Asia's best interest to keep its savings at home. The capital could be tapped to retool economies and improve education, infrastructure and health care. It also would be on hand to help economies in crisis.
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Greenspan should go home and stay there.