Discussion in 'Economy' started by JimH52, Feb 7, 2009.
China now biggest foreign owner of U.S. Treasuries - BloggingStocks
This is principally due to the Chinese having sold a tremendous amount of their US GSE Agency debt and mortgage backed security holdings and swapping for treasuries.
Additionally, Chinese holdings of long term treasuries have actually declined since November. The increase in overall treasury holdings is due to significant increases in Chinese buying of short term treasuries. This is not a long term stable form of financing for the US.
It is clear that domestic sources will be needed to fund the massive upcoming US Treasury issuances. I believe that when the time is right, the Fed will encourage the banks (with their massive reserves) to invest in treasuries to help support the market. As the yield curve widens (as it has been) and the Fed ceases to pay interest on excess reserves, this will provide a bigger push for the banks to invest in treasuries. However, bank reserves have been on the decline in recent weeks, especially last week (a huge drop in reserves on deposit with the Fed - more than $130 billion). It seems that some of the Central Bank swaps are unwinding, some commercial paper has been maturing and going unreplaced, and outstanding repurchase agreements are now $0.
This is kind of a strange situation: they are buying our debt with the money we paid for their importing their goods. And because of them buying our debt, the $ stays high and we can keep buying their goods. And they can keep buying our debt, until one day they might own US.
Lucky for us that the bush government that is responsible for this is gone, and the Obama administration seems more aware of this dangerous situation. Let s not forget that China is still a communist governed country, despite the layer of capitalist paint on it (the communist government controls the Chinese economy very firmly).
What is Obama going to do that will make our relationshiop with China any diferent ?
Munin, it not JUST the Bush Administrations fault that foreign governments now own so much of our debts.
I mean he's got his share of the responsibility, but then too so does Clinton, Bush I, Reagan, Carter, Ford, NiXXon, Johnson, Kennedy, Eisenhower, Truman and FDR.
Our trade policies punish industries on American soil and reward industries on foreign shores.
Hence the imbalance of trade which ends up as debts owed to foreign nations.
Because his picks for the government: Geithner Hints at Harder Line on China Trade: http://www.nytimes.com/2009/01/23/business/worldbusiness/23treasury.html?partner=rss
Yes, but during the governing of those presidents the situation was "under control".
FTD - Statistics - Country Data - U.S. Trade Balance with China
As is the beginning of a forest fire.
There is a big difference between a campfire and the beginning of forest fire: people sitting at the campfire are the ones that should prevent it from getting into a forest fire if they loose control over it. That is what the Bush government failed to do. Forest fires are not caused by people that start a fire, they are caused by people who loose control over their fire.
In my opinion it was a campfire at first (under control), the Bush government failed to secure it and it turned into a forest fire. ( the trade balance got from - 70 billion to - 250 billion dollars )
It beings to be a little frightening if you think about it for a while. If there is a country in the world that we need to untrustful of, it is China. This apparent imbalance my someday bring this country to its knees...IMHO.
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