In a recent memo to shareholders, the Affinity Group Solutions analyst team stated that they are in agreement with other major investment service groups in the belief that there are no foreseeable factors that would dislodge the dollars dominance as the worlds currency reserve.
The fiscal health of the worlds largest economy has come under scrutiny by its creditors as bailouts and stimulus plans swell a budget deficit forecast to soar to a record $1.85 trillion this year. Although both China and Russia, the largest and third- largest foreign holders of the debt, have said they may diversify some of their reserves, Affinity Group Solutions say this is unlikely to kickstart any change to the dollars unchallenged status.
Even if the U.S.s ratio of debt to gross domestic product were to exceed 100 percent, more than double the current level, the countries rating would still be secure as long as borrowing costs stay low, according to the analysts at Affinity Group Solutions.
China, which in March called for the U.S. to guarantee the safety of Chinas assets, is still buying Treasuries. Premier Wen Jiabaos government has increased its holdings of the securities by almost a quarter to $763.5 billion since the onset of the global credit crisis in September, according to data cited in the Affinity Group Solutions release.
The question you have to ask is: What does it mean to be a safe haven in the end? said an analyst at Affinity Group Solutions. The test is that when you have a big problem, either in the economy or if you have the threat of a war, where do you think people are going to put their money?
