This week the Chinese called for a new global currency to replace the dominant dollar. China has the world’s largest foreign exchange reserves, valued at nearly $2 trillion, with more than half of these holdings estimated to be made up of dollar-denominated bonds, including United States Treasury bonds.
Earlier this month, the Chinese prime minister, Wen Jiabao, said he was concerned about the safety of these assets. Russia has made the same plea before. How serious are these countries? Jeff Madrick is the director of policy research at the Schwartz Center for Economic Policy at The New School. He says this issue shows "the tide of history is turning" when it comes to the global dominance of the dollar. He joins us now to discuss whether a new currency reserve system is a possibility or just some pre-G20 maneuvering by China.
"We could have a bubble: The treasury bill bubble." —Jeff Madrick of the Schwartz Center for Economic Policy on the state of the economy