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Richard J. HerringDuring August 2011, this privilege was extended to 67,359 companies.Not surprisingly, foreigners prefer to sell goods and services foryuan rather than to purchase Chinese exports with yuan. (Their presumptionis that the yuan will inevitably appreciate relative to mostother currencies.) The result is that there is an increasing offshorepool of yuan (‘redbacks’) held mainly in Hong Kong. A nascent offshoremarket in yuan-denominated bonds has emerged (the dimsum market) based mainly in Hong Kong, but with recent issues inLondon.33Nonetheless, all of this activity is far short of what would be requiredto launch the yuan as a major reserve currency. To do so, Chinawould need to end its policies of financial repression and capital accountcontrols – which have been important tools to sterilize reserveinflows and manage the economy. China would also need to giveup setting its exchange rate, which has been a key policy tool, andpermit itself to run sizeable current account deficits to accommodatethe reserve currency demand for the yuan. This agenda is not impossible.Indeed, it would probably be in the best interests of China’scitizens. But the difficulty in moving from China’s current financialsystem to the open financial system necessary to sustain a reservecurrency should not be underestimated. The measures necessary toopen domestic capital markets might, indeed, undermine the currentpolitical structure.What can be concluded from the preceding observations? First, if theU.S. should default on its obligations it is likely to be a soft default,not a hard default. The main risk that should concern foreign holdersof dollars is the risk of diminished purchasing power that is not compensatedfor by higher nominal interest rates. Second, although thereserve currency role of the dollar is not overwhelmingly valuable, itcannot be renounced without global systemic impact. Third, in viewof the substantial network advantages that the dollar has achieved,the loss of its role as the principal reserve currency would occur onlyif a viable substitute emerges slowly over time, or in the aftermathof a truly major shock such as a hard default on dollar obligations.
34 Default and the International Role of the DollarReferencesCasciani, Dominic, 2010, “Why criminals love the 500 euro note,”BBC News http://news.bbc.co.uk/2/hi/8678979.stm.Cooper, Richard N., 2009, “The Future of the Dollar,” Policy Brief,Peterson Institute for International Economics, September.Eichengreen, Barry and Marc Flandreau, 2008, “The Rise and Fallof the Dollar, or When did the Dollar Replace Sterling as the LeadingReserve Currency?” paper prepared for a conference in honor ofPeter Temin, Cambridge, May 9.Moody’s Investors Service, 2011, “Sovereign Default and RecoveryRates, 1983-2010,” May 10.Reinhart, Carmen and Kenneth S. Rogoff, 2008, “The ForgottenHistory of Domestic Debt,” Working Paper 13946, http://www.nber.org/papers/w13946.
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ivPublished by FIC Press2405 Ste
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viContents8 Thoughts on Debt Sustai
Page 9 and 10: viiiContents
Page 12 and 13: The Contributors Anna GelpernAme
Page 14 and 15: The Contributors Howell E. Jacks
Page 16 and 17: The Contributors School, as well
Page 18 and 19: The Contributors Zoltan PozsarIn
Page 20 and 21: The Contributors Richard SyllaNe
Page 22 and 23: xxiAcknowledgmentsWe would like
Page 24 and 25: xxiiiPREFACEThe Law School and t
Page 26 and 27: PREFACE academic circles. A sove
Page 28 and 29: Richard Sylla 11U.S. Government Deb
Page 30 and 31: Richard Syllasigned from office in
Page 32 and 33: Richard Syllalike the United States
Page 34 and 35: Richard SyllaAfter 1815, a generall
Page 36 and 37: Richard Syllapurchase to back their
Page 38 and 39: Richard Syllational debt and reduce
Page 40 and 41: William W. Bratton 132A World Witho
Page 42 and 43: William W. Brattonwould go from a c
Page 44 and 45: William W. Brattonthe system, than
Page 46 and 47: ConclusionWilliam W. Bratton19At th
Page 48 and 49: Richard J. Herring 213Default and t
Page 50 and 51: Richard J. Herringpay is seldom in
Page 52 and 53: Richard J. HerringFigure 2: Archety
Page 54 and 55: Richard J. Herring27Figure 4: The R
Page 56 and 57: Richard J. Herring29Figure 6: Deman
Page 58 and 59: Richard J. HerringGovernment bonds
Page 62 and 63: Zoltan Pozsar 354A Macro View of Sh
Page 64 and 65: Zoltan Pozsartions, forming an inte
Page 66 and 67: Zoltan Pozsarfunding for safe, shor
Page 68 and 69: Zoltan Pozsarfor the reduction in t
Page 70 and 71: Zoltan PozsarWhile increased rollov
Page 72 and 73: Michael W. McConnell 455Origins of
Page 74 and 75: Michael W. McConnellAlthough the Co
Page 76 and 77: Michael W. McConnellvene? Who would
Page 78 and 79: Michael W. McConnell(Social Securit
Page 80 and 81: ConclusionMichael W. McConnell53Whe
Page 82 and 83: Howell E. Jackson 556The 2011 Debt
Page 84 and 85: Howell E. Jacksonloss in liquidity.
Page 86 and 87: Howell E. Jacksonand provides resou
Page 88 and 89: Howell E. JacksonWhile assertions o
Page 90 and 91: Howell E. Jacksonof those payments.
Page 92 and 93: Howell E. Jacksonwhich payments to
Page 94 and 95: Concluding ThoughtsHowell E. Jackso
Page 96 and 97: Richard Squire 697A Market for End-
Page 98 and 99: Richard SquireSo far, there is litt
Page 100 and 101: Richard Squirethat the reference en
Page 102 and 103: Richard SquireIn fact, the gross no
Page 104 and 105: Richard Squireto only 22.6%. Thus i
Page 106 and 107: Richard Squirewill default. An econ
Page 108 and 109: Richard Squireannounced that in liq
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Richard SquireCDS on USA and Correl
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Richard Squiremean, however, that t
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Peter R. Fisher 878Thoughts on Debt
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Peter R. Fishernot really an insura
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Peter R. FisherU.K. prospered great
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Peter R. FisherSources of income be
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Peter R. Fisherlead to greater comp
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Peter R. FisherCentral bank mytholo
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Peter R. Fisherboth sides of their
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Deborah Lucas 1019The Federal Debt:
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Deborah LucasProjected Size of Defi
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Deborah Lucasrevenues. In fact, man
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Deborah Lucasly from the global des
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Deborah Lucas109Figure 2: Primary S
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Deborah Lucas111Figure 4: Medicare
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James R. Hines Jr 11310The Tax Reve
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James R. Hines Jrrevenue rely on ex
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James R. Hines JrStates is the lone
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James R. Hines Jr119Table 3: Social
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James R. Hines Jrtapped federal tax
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James R. Hines Jrer economic costs
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James R. Hines Jrtries, and consequ
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James R. Hines Jrtries from 1999 to
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James Kwak 12911Can the United Stat
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James Kwakone hundred years. 6 At t
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James Kwakthe Royal Navy had over o
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James Kwak135Figure 1: National Deb
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James Kwaka real growth rate of 2.2
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James Kwakkeep the national debt at
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James KwakRepublicans have seized o
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James Kwakreduction package. 45 Fur
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James KwakThe bottom line is that f
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James Kwakprovisions, including hea
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James KwakDespite these political c
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Jim Millstein 15112Burning the Furn
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Jim Millsteinits spending and tax c
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Jim MillsteinWhile safe-haven flows
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Jim Millsteinon reserve balances wi
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Jim Millsteinfull list of options i
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Jim Millsteinfundamental disagreeme
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Jim MillsteinHowever, other things
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Jim Millsteinwould likely command a
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Jim MillsteinThere will inevitably
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Charles W. Mooney, Jr 16913United S
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Charles W. Mooney, JrSecond, would
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Charles W. Mooney, Jrticipants, did
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Charles W. Mooney, JrThe extent and
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Charles W. Mooney, Jr“Treasury Di
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Charles W. Mooney, Jrin subpart B i
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Charles W. Mooney, Jrcount holders
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Charles W. Mooney, Jrdefault. If an
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Charles W. Mooney, Jrcould be achie
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Charles W. Mooney, Jrconsider adopt
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Charles W. Mooney, Jror gold coin.
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Charles W. Mooney, Jrpre-1933 legis
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Charles W. Mooney, Jrbegin by notin
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Charles W. Mooney, Jrformity requir
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Charles W. Mooney, Jrnation based o
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Charles W. Mooney, Jrthe Treasury d
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Charles W. Mooney, JrUnder any cohe
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Charles W. Mooney, Jrcontext of ban
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Charles W. Mooney, Jrcans in Congre
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Charles W. Mooney, JrThe government
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Charles W. Mooney, JrIf Wade’s sp
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Charles W. Mooney, Jring in Perry,
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Charles W. Mooney, JrThere would be
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Charles W. Mooney, JrBut that concl
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Charles W. Mooney, JrCourt of Feder
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Charles W. Mooney, Jrtem. 135 This
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Charles W. Mooney, Jr. b. The Race
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Charles W. Mooney, JrBut, of course
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Charles W. Mooney, Jrhave adopted r
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Charles W. Mooney, Jrtions Conventi
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Charles W. Mooney, Jrthe other hand
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Charles W. Mooney, JrIf the U.S. co
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Charles W. Mooney, Jrpursue massive
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Charles W. Mooney, Jrof multination
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Donald S. Bernstein 23714A Comment
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Donald S. Bernsteinis what most ban
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Donald S. BernsteinAmendment, simpl
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Donald S. Bernsteinfallout of alloc
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Steven L. Schwarcz 24515Direct and
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Steven L. Schwarczin Perry held tha
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Steven L. Schwarczwould apply to fe
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Steven L. Schwarczunder Section 13(
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Steven L. SchwarczD. Assessing the
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255AppendixThe 2011 Debt Limit Impa
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Jeremy Kreisberg & Kelley O’Mara
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