Too Much of a Good Thing

Forbes has an interesting story on the stunning growth in China's foreign currency reserves.

From the story...

• When China began opening its doors to the outside world in 1979, its official reserves stood at a meager $2.2 billion. Now, it has nearly $1 trillion.
• [China] added about $200 billion in each of the past three years and is now watching the kitty grow at a rate of $20 billion a month
• The central bank's latest quarterly report, issued Aug. 9, explicitly admitted the need to curb the rise in foreign reserves

Forbes needs to take the next step and ask: "What will China do with all that money?" In an age of rising (and even accelerating) commodity prices, the obvious thing to me would be: "Buy and stockpile strategic commodities." Copper ... zinc ... aluminum ... gold ... silver ... oil ... natural gas.

What do you think?

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