Summers to World: Quit buying US Treasuries, dummies!

[ladelfina]

Advice to Invest Less in U.S. Bonds
Foreigners Can Do Better, Summers Says

http://www.washingtonpost.com/wp-dyn/content/article/2006/06/21/AR2006062101740.html

(hope that isn't too long a link)

...he pointed out that at an annual return of 5 percent -- a conservative estimate for the long-run yield on a sensible stock portfolio -- the $2 trillion in excess reserves could produce average annual yields of about $100 billion. That is more than all the rich countries in the world spend on foreign aid to poorer countries each year.

 

[wabmester]

Let me get this straight. The central banks of emerging countries want to stabalize their currency, so they use US treasuries as a proxy for their own currency reserves. Makes sense. But this guy thinks they should invest in the stock market? For higher returns? These countries are looking for currency stability, not returns.

If they wanted higher "returns," they should put the money to work within their own economy, not our stock market.

 

[ladelfina]

wab, you are right! I just thought it was bemusing... Also, what (to Summers) is "the stock market"? The US stock market? Typical Harvard type. Pearls before swine.

 

[Nords]

But this guy thinks they should invest in the stock market?    For higher returns?   These countries are looking for currency stability, not returns.

He's just afraid that the world's women wouldn't be able to handle the math...