AAA Crisis Drives Biggest Trade in History

As reported by Bloomberg’s William Pesek, Timothy Geithner says U.S. debt is the safest anywhere even after Standard & Poor’s yanked away its AAA credit rating. America’s bankers in Asia may have a very different take on things.

Asia is sitting on $2.6 trillion of U.S. Treasuries, at a time when one of the official arbiters of creditworthiness has just delivered a vote of reduced confidence. S&P said as much last week when it cut the U.S.’s sovereign rating to AA+. That’s what happens when politicians in Washington act more like stewards of a developing economy than a world leader.

Reassurances by U.S. Treasury Secretary Geithner are small comfort as Asian nations consider how to move beyond export- driven development models that compel them to buy Treasuries with their accumulated dollars. It’s time for Asia to figure out how to get beyond this trade, which locks it into soaking up ever more U.S. debt to keep their own currencies artificially weak. Here are 10 things Asian leaders need to think about as they try to get to the end of 2011 with their economies intact.

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