The fear, which arose from around 1980, that the USD could suddenly lose a great deal of its value on the international currency markets. – This concern is based on the fact that many of the world’s central banks hold all or most of their currency reserves in U.S. dollars, usually in interest-bearing U.S. Treasury bonds. In the event that central banks – especially in Asia – reduce their dollar holdings very rapidly and shift their foreign exchange reserves, then the USD could plummet. – Of course, the central banks would be most affected by such a crash of the USD. They therefore have every reason to carry out any restructuring of their portfolios slowly and very carefully and, if possible, in consultation with each other. – In the course of the global financial crisis starting in the fall of 2008, which developed from the subprime crisis of the previous year, many central banks, especially in Asia, decided to gradually, step by step, fan out their foreign exchange reserves, which until then had been invested mainly in USD. – See savings glut, crisis, systemic. – Cf. Financial Stability Report 2011, pp. 58 et seq. (dollar refinancing gap of German banks; overview).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
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