Russia Warns on Default Aftermath as Sweden Girds for Disruption
By Niklas Magnusson and Evgenia Pismennaya - Oct 16, 2013
Russia joined China in warning that countries may intensify their search for alternative reserve currencies as the U.S. struggles to avert non-payment on Treasury bonds, with Sweden bracing itself for a default.
A U.S. failure to service its debt would threaten the low-risk status of Treasuries as collateral used around the world, Russian central bank Chairman Elvira Nabiullina said in an e-mailed response to questions from Bloomberg. Endangering the dollar’s standing “seems completely insane,” Swedish Finance Minister Anders Borg said today, adding that his country will ensure its financial system has access to U.S currency in the event markets are disrupted
“The more the situation is prolonged, the more far-reaching the consequences,” Nabiullina said. “Such events result not only in short-term jumps in volatility, but also an erosion of trust in the dollar as a reserve currency and the American financial system as a whole.”
The U.S. Congress has yet to strike an agreement to increase the nation’s debt ceiling a day before the government has said it will run short of funds to honor its obligations. In an English-language commentary published Oct. 13, Liu Chang, a writer with China’s official Xinhua News Agency, called for a new international reserve currency to replace the dollar “so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil” in the U.S.
‘Completely Insane’
“As it is an enormous advantage to be a reserve currency it seems completely insane to even contemplate creating insecurity around that status,” Borg said.
more...
http://www.bloomberg.com/news/2013-10-16/sweden-girds-for-unprecedented-disruption-to-dollar-availability.html
