Hey, other countries do that too. We still pay interest on them. True, we could inflate away our foreign debt. Well, then, you may say, surely the international role of the dollar forces people out there to hold dollars for transaction purposes. When Daewoo repays a dollar loan from Sanwa, it writes a check on its account with some international bank.
Foreigners hold more than billion of American money.
Better not ask what kind. Somehow, I think we can live with that. Paul Krugman is a professor of economics at the Massachusetts Institute of Technology. Link to the Fortune Forum Economy and Politics boards.