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From Bloomberg:

Central banks are increasingly diversifying their reserves, including cutting holdings of dollars, according to a survey sponsored by Royal Bank of Scotland Group Plc, the U.K.'s second-largest bank.

Italy, Russia, Sweden and Switzerland have made ``major adjustments'' in foreign-exchange holdings favoring the euro and the British pound, according to the poll conducted by Central Banking Publications Ltd. between September and December. China also plans to manage its reserves more actively, the report said.

``Central banks are open to saying they've been diversifying to improve returns and reduce exposure to any single currency,'' said Sean Callow, senior currency strategist at Westpac Banking Corp. in Singapore. ``There's no doubt that when they say `diversification' they mean selling dollars.''

Why are they doing this? Simple. If a currency's underlying fundamentals are strong, you buy buy the currency. If a currency's fundamentals are weak, you sell or diversify away from the currency. The US' fundamentals are not that solid from a currency perspective.

First, we have a record trade deficit:

Because we have no national savings:

Foreigners have increased their share of US debt holdings:

The federal budget deficit is nowhere near under control (on the chart, notice the receipts scale is lower than the expenditures scale).

This increases US Gross Federal Debt at a strong and steady rate:

The amount of interest we have to pay on our debt is increasing. Here is a chart of the year-over-year change in the amount of interest we have to pay:

Nineteen of 47 central banks surveyed had cut their share of dollars, while 10 said they had increased holdings. Twenty-one respondents said they had increased their reserves of euros, compared with seven who said they had reduced their holdings of the single currency. The 47 respondents in the survey hold a total of $1.5 trillion in reserve assets.

The short version is simple: The US is borrowing today hoping the growth rate will be fast enough to help us pay down the debt. However, there is nothing extraordinary about the current US growth rate compared to other expansions. Our current growth rate is on par with the growth rate of the last 25 years. Here is a chart of the year over year percent change in GNP:

In short, we are borrowing to achieve the same growth rate we have always had during an expansion.