> Sure, reserves are a form of insurance, but I
> doubt governments are going to spend them on
> domestic job creation schemes; they seem more
> interested in buying pieces of Blackstone and
> Citigroup.
Well, they have the liquid wealth -- which is to say the upper hand. What exactly they'll do next with it can be decided on the spot. The environment in which they'll make the decision is evolving.
Martin Wolf (FT), who -- I believe -- is somewhat sensitive to the broader interests of "global finance" makes a rather distressed exhortation for those countries to decouple. The U.S., he thinks, has painted itself in a corner:
http://www.ft.com/cms/s/0/8bd26b04-ce9e-11dc-877a-000077b07658.html
"I find it impossible to look at what the US is now trying to do without feeling severely torn. If it succeeds it will renew and, at worst, exacerbate the fragility, both domestic and international, that triggered the turmoil. If it fails, the US and, perhaps, much of the rest of the world could well suffer a prolonged period of economic weakness. This is hardly a pleasant choice. But that it is indeed the choice shows how weakened the world economy and particularly the financial system has become.
"The immediate priority ought to be adoption of policies across the world that allow a big fall in the US current account deficit without prolonged weakening of global economic activity. [JH: In other words, spend your savings, expand credit, recycle your reserves in your own economies or in one another's economies.] With this, the world economy can exit from the crisis in better health. Without it, further crises are sure to come. The US cannot make this choice. It rests in the hands of the rest of the world."