EMERGING economies should find other ways to buffer themselves from global crises than stockpiling U.S. government debt, a prominent economist argued Saturday.

    U.S. Treasuries and the debt of other advanced nations may be liquid, but it is far from safe, Cornell University professor Eswar Prasad said in a paper presented to a group of central bankers.

    Emerging countries seeking protection from global shocks by individually stocking up on U.S. debt would be better off banding together to create a pool of funds that could be drawn on in a crisis, he argued. Doing so would give them a backstop should they need it, without saddling their national investment portfolios with debt that could turn sour.

    Sharply rising levels of public borrowing and weak growth prospects in the United States mean that over time the dollar will continue to decline against the currencies of faster-growing emerging markets, eroding the value of emerging nations’ foreign investment, he said.

    And the risks are not only for the long-term.

    The United States’ near brush with default earlier this month, as lawmakers refused to raise the country’s borrowing ceiling until a deficit-cutting deal was reached, brought the potential pitfalls of holding U.S. debt into sharp relief.

    “As demonstrated by recent events in the euro zone, bond investors — both domestic and foreign — can quickly turn against a vulnerable country with high debt levels, leaving the country little breathing room on fiscal tightening and precipitating a crisis,” Prasad wrote. “The U.S. is large, special and central to global finance, but the tolerance of bond investors may have its limits,” he said.(SD-Agencies)