What cost a China-US divorce? - by William Pesek
Returning from China last month, US Congressman Mark Kirk had a bearish take on a high-level visit by American officials. Treasury Secretary Timothy Geithner claimed the US's biggest creditor voiced great confidence in its debt. Kirk, an Illinois Republican, came back with the opposite impression. ''China is beginning to cancel Congress's credit card,'' he told Fox News on June 10. It ''doesn't want to lend much more money to the United States and especially is worried about the Fed's policy of printing money to buy new debt.''
A month later, there's no doubt about whose assessment was more accurate. Chinese leaders are clearly very concerned about the US dollar. Rumors of the US dollar's demise are no longer exaggerated. What is being exaggerated, though, is how easy it will be for Asia to get out of the quandary it's in. Cutting off the US government's credit card, for example, means American consumers can't buy your goods. And any sudden divorce between the world's two main economic powers won't be pretty. Far from it.
It's time to figure out what the next step is, and policy makers need to get serious. Complaining about our dollar-based system won't get us there. Some brainstorming about where to go from here would be far more constructive.
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