Re: [Pen-l] Reserve Currency Question

[Jayson Funke <jfunke@xxxxxxxxxx>]

But cash, as in the case of sovereign wealth funds, can be invested in more
lucrative investments than t-bills. So cash is not always bad to hold,
especially when it is the reserve currency - technically the "highest
quality" money.


On 7/21/09 5:06 PM, "Jim Devine" <jdevine03@xxxxxxxxx> wrote:

> I don't know the law, but it's clearly in the creditors' interest to
> hold T-bills rather than cash, since T-bills pay interest.
> 
> On Tue, Jul 21, 2009 at 2:03 PM, Jayson Funke<jfunke@xxxxxxxxxx> wrote:
>> Hello Penners,
>> 
>> As I understand it, the US requires foreign countries that hold US dollars
>> as reserve currency to do so by purchasing and holding US T-bills (thus
>> contributing to the US's ability to maintain its current account deficit). I
>> recall reading somewhere that as early as the 1950s Congress wrote this into
>> law, that US foreign reserve dollars must be held in the the form of
>> T-bills.
>> 
>> If this is correct, is the US unique in this regard, or do other currencies
>> have similar requirements as to how their currencies are held by foreign
>> states?
>> 
>> Any light you could shine my way is appreciated.
>> 
>> Jayson
>> 
>> Jayson J Funke (ABD)
>> Graduate School of Geography
>> Clark University
>> 950 Main Street
>> Worcester, MA 01603
>> 
>> 
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>> 
> 
> 


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