Aug. 2 (Bloomberg) -- “It’s our currency, but it’s your
problem.” This musing from Nixon-era Treasury Secretary John
Connally is about to find new relevance as the White House
battles Republicans over raising the U.S. debt limit.
Connally couldn’t have foreseen how right he would be 42
years on as Asia sits on almost $7 trillion in currency
reserves, much of it in dollars. Asia’s central banks engaged in
a kind of financial arms race after a 1997 crisis, stockpiling
dollars as a defense against turmoil. That altered the financial
landscape in two ways: One, Asia now has more weapons against
market unrest than it knows what to do with. Two, Asia is
essentially America’s banker, with China and Japan having the
most at stake.
