This is widespread around the Internet in late 2009 and early 2010 in an effort to "scare" investors about the U.S. government's debt burden. The debt is high but we have been here before. Be informed but do not believe the hype, especially, when ideas are misapplied as in this case.
The original Greenspan-Guidotti rule was to condition the amount of access to the IMF's Contingent Credit Line which, by the way, is now defunct and was related to emerging market economies - not the largest economy in the world.
"...Country circumstances vary, and there is no precise level of reserves universally considered either sufficient or optimal. Advanced economies with highly liquid, floating currencies [The U.S. for example] and stable financial market access in domestic currency are unlikely to derive any significant value from large precautionary reserve holdings. Where currencies are less liquid and market access less than assured, reserves may reduce both the risk and impact of current account shocks or capital account crises. There is an extensive literature that attempts to define specific benchmarks for reserve adequacy..." (From: ARE HIGH FOREIGN EXCHANGE RESERVES IN EMERGING MARKETS A BLESSING OR A BURDEN? Department of the Treasury. Office of International Affairs. Occasional Paper No. 6 dated March 2007)
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.