Despite a good start to the year, when the private sector was a large net purchaser of dollar assets, central banks came to the rescue again. The People’s Bank of China has let it be known that China increased dollar reserves by $207bn (€159bn) in 2004, financing nearly a third of the US current account deficit, estimated at $650bn.
I don’t know how it works – how it’ll end up – or how to get of the situation – but I think this is supposed to be really bad. Especially if they move over to Euros. Any economists care to elucidate?