Bernanke on the Renminbi (again)

The FT has an article on Bernanke (rather than the renminbi) today. It is headlined : Rise in renminbi 'would not harm US'. That, you would think would be obvious, and hardly worth a headline. It isn't really the renminbi that Mr Bernanke is talking about, but the US Treasury debt.

"“I do believe that US financial markets and world financial markets are sufficiently deep and liquid and there's sufficient private interest in US securities, that moderate adjustment in these reserve positions are not a risk to US interest rates or the economy,” Mr Bernanke said, referring to the possibility that Asian governments would stop buying US assets."

So the real questions are:

* will any 'flexibilising' of the renminbi have a major impact on the US trade deficit: my answer is an unequivocal no.

* will China stop buying US treasuries any time soon: this is often phrased "is the dollar about to crash", and again my answer is an unequivocal no.

The latter is the more interesting question, and my internal jury is still out on this to some extent. But about one thing I am sure, with euro entering a phase of enduring weakness, and with no other reserve currency on the horizon, the dangers of any 'dollar denominated assett' flight in the near future are remote at least.

Of course, if one day China gets big enough to 'tu a tu' with the US, then obviously things become very different, but this day is still some way off.