India's Prime Minister is bullish on the greenback and the U.S. economy
Nov 22nd 2009 8:00PM
Updated Dec 4th 2009 4:58PM
The statements come as Singh prepares for a state dinner hosted by President Obama in Washington, D.C., on Tuesday -- and in the wake of India's $6.7 billion gold purchase from the International Monetary Fund earlier in the month. The 200-metric-ton purchase made India the ninth-largest holder of gold reserves in the world and set off speculation that other governments may also seek to diversify from dollar-based assets.
But "as far as I can see right now there is no substitute for the dollar," Singh told Fareed Zakaria, who hosts the CNN show.
Asked if Singh disagreed with recent rumblings out of Russia and China for a potential move away from the dollar as a reserve currency, Singh pointed out that China holds about $2.5 trillion in dollar reserve assets but has not "disposed of even a fraction of them."
"That is a measure of the confidence the world has in the dollar," Singh said.
"The Capacity to Bounce Back"
Singh's strong statements may be intended to soothe concerns that developing countries are getting skittish about the dollar as it loses value and the U.S. faces record deficits. India's move into gold rattled some investors who thought it foreshadowed other countries increasingly ditching the greenback for hard assets as well.
Gold has soared recently amid growing concerns about inflation and a devalued dollar. With sky-high unemployment, the Federal Reserve is expected to keep interest rates low and continue to expand the money supply for some time.
Singh, an accomplished economist who spearheaded India's economic liberalization in the 1990s, also sounded relatively optimistic about the broader U.S. economy.
While acknowledging that a host of problems exist, Singh said that he had "no doubt that these things are not permanent irreversible shifts but that the American economy has the capacity to bounce back to its normal growth path."