China Is Now in Firm Control of U.S. Debt Markets 79 comments
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It is hilarious listening to the propagandists try to “spin” the events in bond and currency markets to make it sound like the U.S. government is still operating from a position of strength.
While there are many Western, corporate-media outlets spouting such drivel, I'll use the Financial Times as my example.“China stuck in dollar trap”, crows FT on May 24th. Then, later “...[Beijing] has little choice but to keep pouring the bulk of its growing reserves into the U.S. Treasury”.
What somehow escaped this “analysis” by FT is that China won't touch any U.S. dollar asset except Treasury bonds. The monthly flows of capital into (or out of) the U.S., which is known as the Treasury Department's “TIC” report, tell a clear story.
So far, in the three months of data which have been reported for this year (Jan., Feb., March), the net result was an outflow of capital from the U.S. totaling $211.4 billion.
Does this number suggest China is “trapped” into buying U.S. debt?
The March number is slightly more instructive. This marks the beginning of the newest propaganda-offensive from the U.S. corporate media in asserting (yet again) that the U.S. economy was starting to “recover”. This was epitomized by U.S. court-jester Ben Bernanke prancing around, braying about “green shoots”.
In March, the TIC inflow into the U.S. was a paltry $23.2 billion. However, net purchases of U.S. Treasuries totaled $47.9 billion – meaning the net results for all other categories of U.S. debt was yet another outflow of $24.7 billion.
About the only useful piece of information in the Financial Times' propaganda was to note that China was only purchasing short-term Treasuries. This is highly significant for two reasons.
First, the shorter-term Treasuries are the most-liquid form of U.S. debt. It's no surprise that China is choosing only these types of Treasuries, since it is currently on a commodities buying-spree – which it is financing with U.S. Treasuries. In other words, while China may be a net buyer of U.S. Treasuries in relation to its transactions with the U.S., on a global basis, China is spending its U.S. dollar holdings at least as fast as it is accumulating them. Does this look like China is “trapped”?
The second important point about China's focus on short-term Treasuries is that this does very little to help the U.S. fund its gigantic, out-of-control deficits. The focus by China (and most other foreign buyers) on short-term Treasuries means that not only is the U.S. being forced to dump the largest glut of new Treasuries in history on this already-saturated market, but it is also being forced to try to “roll-over” additional, huge amounts each month as the short-term Treasuries mature.
Does this support the ludicrous assertion by FT (and others) that China “is helping Washington fund its growing budget deficit”?
How exactly will the U.S. “fund” a deficit certain to exceed $2 TRILLION (just in the current fiscal-year) with an outflow of more than $200 billion so far this year?
The ultimate rebuttal to the nonsense of the propagandists is to simply note what is happening in markets. Since the U.S. bond-bubble hit its peak late last year, U.S. Treasuries have already plunged a sickening 30% (see “U.S. Bond Bubble Bursts – bye-bye Equities Rally”).
Meanwhile, the U.S. dollar just hit its lowest level of the year. A look at this horrific chart suggests that the plunge of the dollar is much closer to the beginning than the end.
It is not China which is “trapped”. It is the U.S. government. Trapped by years of lies and statistical “padding” of its declining economy. Trapped by years of grossly over-spending. Trapped by the self-destructive machinations of the U.S. financial crime syndicate, which runs the U.S. government in all but name.
When China runs out of things to buy with its U.S. Treasuries, it will stop accumulating them – period! Instead, it will channel its huge budget surpluses into infrastructure development and other internal uses: for a huge economy which is still in the infancy of its development.
This is the story which the Financial Times should have written.
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This article has 79 comments:
As the Fed is targeting the Long Maturities, it is hardly surprising that China has shifted to the shorter maturities. S&Ps Triple A ratings are looking more ludicrous by the day.
A conspiricist might even consider that China is setting up an alignment of maturing bonds to break the bank. Perhaps that would be stretching things a little, but a World dominated by a dollar trading system serves nobodies interest outside the US. Of course China would like to see that system ended. The question is are they happy to see a natural progression or are they prepared to tear down the walls of the temple to bring it about.
I also find it quite funny to see everybody calling to buy gold. Look, there is no inflation right now. There is just speculation about the eventual weakness in the USD. This is driving gold and oil higher because they are paper and speculative markets.
To verify my theory just check out the price of Nat Gas, which in my view is a much better indication of commodity inflation. It keeps on deflating. It is impacting the Utilities' profitability and is a proof that this current recession is driven by delevraging and deflation.
"If you've got them by the balls, their hearts and minds will follow."
What would happen when the Chinese discover that they got worthless paper for their exports? Here's a possible scenario:
"Meanwhile the timber was being carted away at high speed. When it was all gone, another special meeting was held in the barn for the animals to inspect Frederick's bank-notes. Smiling beatifically, and wearing both his decorations, Napoleon reposed on a bed of straw on the platform, with the money at his side, neatly piled on a china dish from the farmhouse kitchen. The animals filed slowly past, and each gazed his fill. And Boxer put out his nose to sniff at the bank-notes, and the flimsy white things stirred and rustled in his breath.
'Three days later ... a choking roar of rage sounded from Napoleon's apartments. The news of what had happened sped round the farm like wildfire. The banknotes were forgeries! Frederick had got the timber for nothing!
'Napoleon called the animals together immediately and in a terrible voice pronounced the death sentence upon Frederick. When captured, he said, Frederick should be boiled alive."
- George Orwell, The Animal Farm.
how will our weak financial position affect our dealings with their ally north korea over the underground test and the short range missle tests. remember china now has icbm targeting capability thanx to the repayment of illegal donations for the clinton campaign. if i recall correctly the bush administration updated the tech.
it looks to me like this recent developement will give gold a boost.
we live in interesting times.
Some numbers, household savings have improved from -2% to +5% ! thats 7% x $8000bn or ~$600bn swing, and i suspect most of that will go into US treasuries via the savings accounts. Current account deficit was running at $800bn a year to Q2 2009 ~$400bn and still improving, so the US is becoming less reliant on foreigh capital inflows..
I am not saying that the USA its currency and treasury bonds are out of the woods, but looking from these statistics, i don;t think the situation is as doom and gloom as many are saying.
In either event it is another example to the distrust of the failing dollar and the Chinese moving past it. They may have already spent all of the US treasury debt they originally carried on all of the commodities they have been buying in a world wide shopping spree.
As long as you buy commodities that store easily (not nat gas), dont rot and dont eat you can sit on them for a long time. Like a 30 yr treasury note that gives no interest. However its a great inflation hedge if the entire world is printing money madly into the night only to drive inflation skyward by morning (chinese perception of time).
Long term the Chinese plan might be for a dollar collapse to initiate a commodity backed currency which they are buying like crazy right now.
Obviously they are not fools.
Don't worry, I'm already working on a follow-up to this which should help reality to sink in further.
mr jeff, I love you.
finally, a dissident, though, congruent voice among so many others.
you couldnt be more right, I share the same thoughts as yours.
the great majority of analysts, pseudo-experts, either dont want to see, or pretend they dont understand whats going on (the probably work for those same risk-rate agencies, that were giving free tripe-As last year.. and then.. we all know what happened)
anyway,
china is publicly, almost weekly, demanding america to re-assure the USD position as a strong currency,
while they, wisely, dump their dollars, in infrastructure projects overseas.
the latest brilliant move, was the investment of 10 billion dollars (what is 10b USD out of 2t ?) in brazilian state owned co. petrobras, in exchange for OIL royalties and/or a share of the oil fields.
what does that means ?
while the USD still worth something, they are using it, to switch to other investments... commodoties.
I believe several other similar moves will come from them.
stupid are those, who say - "china aint doing nothing, they keep trusting the US bonds.. look they keep accumulating" - hahaha, okay. - "if they are dumping it why havent they done it already?" -
its idiot to think they will overnight, just dump everything
it took them decades to accumulate 2 trillions, and now, in less than a decade to come, they will sure exchange all of it for commodoties.
so, enjoy while the dollar still worths something, or.. buy grains, oil, or a cow.. god knows. go figure it.
The Chinese may well devise and execute an escape plan over the next 2 years. The American people, unfortunately, have no such option.
exactly what I think.
On May 26 09:42 AM doubleguns wrote:
> Fear of the dollar could be driving Brazil and China to begin doing
> business in thier local currency's instead of dollars, or are the
> Brazilians no longer interested in taking US treasuries from China?
>
>
> In either event it is another example to the distrust of the failing
> dollar and the Chinese moving past it. They may have already spent
> all of the US treasury debt they originally carried on all of the
> commodities they have been buying in a world wide shopping spree.
>
>
> As long as you buy commodities that store easily (not nat gas), dont
> rot and dont eat you can sit on them for a long time. Like a 30 yr
> treasury note that gives no interest. However its a great inflation
> hedge if the entire world is printing money madly into the night
> only to drive inflation skyward by morning (chinese perception of
> time).
>
> Long term the Chinese plan might be for a dollar collapse to initiate
> a commodity backed currency which they are buying like crazy right
> now.
>
> Obviously they are not fools.
the chinese gov didnt support a strong dollar in the 90's to 2000's because they want to shower americans with free gifts. nor do they plan to tear down the dollar to "show em whos the real boss". they buy and sell the dollar solely for the benefit of the chinese citizen, the exact reason why obama and fed is playing with their monetary policy.
On May 26 09:09 AM fireball wrote:
> we do not think like the chinese. because of language differences
> we can't. language forms thought patterns. we know they think in
> longer time span strategies. perhaps they follow "the art of war".
> the height of skill says you win without a single battle.
> how will our weak financial position affect our dealings with their
> ally north korea over the underground test and the short range missle
> tests. remember china now has icbm targeting capability thanx to
> the repayment of illegal donations for the clinton campaign. if i
> recall correctly the bush administration updated the tech.
> it looks to me like this recent developement will give gold a boost.
>
> we live in interesting times.
China is really playing a smart game with commodity purchases paid with Treasuries while only purchasing short-term Treasuries. Let Washington keep up it's insane policies and blather. China knows those fools can't keep this game up indefinitely and they don't suffer citizenship under them.
Detroit had decades of growing assistance from Washington as they stayed the course in decline. We have reserve currency status and lots of overseas creditors. With the awful policies growing worse by our leaders, the question about our decline is only, how fast?
Nor is your use of "budget surplus" correct. Budget surpluses do not result in foreign treasury accumulations, trade surpluses do.
Basically I think you have a pretty weak understanding of how trade works and unfortunately it shows, so you should just stop it.
they are looking at reclaiming the region eventually. the main obstacle is the u.s. military. that is according to an acquaintence from formosa. i knew they wanted the island but did not realise they are looking at the region. i think they see it as more complex than we do.
i don't think they want to make our tennis shoes forever. they will play our game for as long as it seems to align with their purpose.
it does not appear to me that obama has the citizen's best interest at heart. it appears he has political debts and a voting block as his main interest.
i agree with what you said to a point but maybe i did not spell out well enough what i meant by the difference in thought processes.
On May 26 10:22 AM dybydx wrote:
> the chinese, thinks exactly like the americans - they place the welfare
> of their citizen first.
>
> the chinese gov didnt support a strong dollar in the 90's to 2000's
> because they want to shower americans with free gifts. nor do they
> plan to tear down the dollar to "show em whos the real boss". they
> buy and sell the dollar solely for the benefit of the chinese citizen,
> the exact reason why obama and fed is playing with their monetary
> policy.
On May 26 10:42 AM puttster wrote:
>When you have US dollars there
> are two places they can end up - US goods and US financial instruments.
The simple fact is, too much $ and too many treasuries = inflation and higher bond rates. No one is forcing Treasury bond rates up on purpose besides the misguided administrations of Bush Jr. and Obama. Blame the real culprits not some strange foreign power that has been happy to fund your excesses for decades. They only funded them because they trusted that your economy was more stable than theirs. It's not a sign of dominence over America, or a sign that they have no choices. Their habit of buying Treasuries has largely been a sign of trust. That trust is now in question.
Wouldn't you question someone's trust if they just made your long term investment in them loose 30% of it's value in less than a year? I would. So can you really blame them? Is this the act of someone really in control? The answer is no on both counts. Is their recent actions a signal things are changing? Does it not show they can be dollar risk adverse? The answer is yes on both accounts. They aren't in control and they don't need to be as heavily leveraged in US Treasuries as they have been before.
We make America what it is. If we want to bankrupt ourselves it will solely be us who does it.
1. Learn Mandarin
2. Buy PHYSICAL Gold and Silver
3. Invest in yuan
4. Do 1, 2, and 3 NOW!!!!!
well...i actually read it. over the past few months i have been looking at a few ideas that keep being a thorn in my side. most importantly it is the fact that "china keeps buying US debt" starkly contrasts what i have been thinking for a long time. the US debt market is a joke- something that can be seen in the collapse of last week- and why there is any need for debt i can't understand. i know all the rebuttles of this and that and they need us as we need them, but that doesn't sit in my book. it is not correct. china not having any other options to invest in does hold mustard. so why are they buying it, because chinas TIC data DOES show that it is a growing holder. barring that all numbers can be fudged...what have i been missing that the billion people over there much smarter than me are not missing.
then i read a few papers from overseas and it seems to make a little bit more sense. china is not buying treasuries. well...yes...they are but not really. there was a listing of about 100+ major sovereign wealth funds that have been doing heavy open business with china. there isn't much transparency of the workings, but the general gist is that china is using US debt as collateral for loans, basically dumping the debt. think about it- if you were 80% owner in a company and don't think things look could- how do you liquidate your position without affecting share price? china is buying US treasuries and then going and peddling them to hundreds of buyers who are enamored with US ratings and owning that paper. china is using the paper as collateral for loans- if they don't repay they loans who cares, the other country just holds onto the collateral and china keeps the cash. they are basically dumping treasuries...while making it look like they are still buying them. they are taking the cash and hoarding hard asset commodities.
explains how they were also able to buy up 70% of the copper reserves in the world over the past three months- a feat that is equivalent to 11 years of copper usage in that country
good article
On May 26 06:35 AM Dave Wrixon wrote:
> I think the problem is that China regards the Fed intervention with
> distrust. The Fed is effectively trying to distort the yields on
> Treasury Bonds. This is clearly designed to help the Federal Government
> finance its debts, but obviously somebody else has to pay. And that
> means Bond investors. Clearly China effectively view the Feds intervention
> as Schill Bidding, and with some justification. Would you bid in
> an Auction that you knew was rigged against you?
>
> As the Fed is targeting the Long Maturities, it is hardly surprising
> that China has shifted to the shorter maturities. S&Ps Triple
> A ratings are looking more ludicrous by the day.
>
> A conspiricist might even consider that China is setting up an alignment
> of maturing bonds to break the bank. Perhaps that would be stretching
> things a little, but a World dominated by a dollar trading system
> serves nobodies interest outside the US. Of course China would like
> to see that system ended. The question is are they happy to see a
> natural progression or are they prepared to tear down the walls of
> the temple to bring it about.
On May 26 10:03 AM User 353732 wrote:
> US debt and the US dollar are like a city under siege........but
> not by the Chinese (or the Russians or the Taiwanese or the Japanese)
> but by our own corrupt elites. The Chinese , in my view, do not want
> to control the besieged city ( where is the upside amongst the rubble
> and smoke?) : they want to escape from the city.
> The Chinese may well devise and execute an escape plan over the next
> 2 years. The American people, unfortunately, have no such option.
My take on China is this: They think DECADES ahead--and always have!. Unlike we Americans that think about what we are having for dinner, or can we screw our neighbor tonight AFTER dinner.
China will--in time--be controlling this country's wealth, since we are systematically GIVING it to them!
Buy gold and silver, a safe, and a gun. Radical? No, just realistic. Oh, don't forget to order the Mandarin CD!
Actually, the "TIC" numbers have been dreadful for the first 3 months of this year: a net OUTFLOW of over $200 BILLION. How do you "fund" TRILLIONS in debt with an OUTFLOW?
Yes, Treasuries are still being bought. But using the last report as an example (which was a "good" month), the there was a net purchase of $47 billion of Treasuries, but only a total INFLOW of $23 billion - meaning every other form of U.S. debt is being dumped.
The problem is that even with YIELDS on bonds being pushed higher, which will be crippling for this damaged economy, the plummeting dollar STILL means U.S. debt is unattractive to foreign investors.
Thus, barring a DRAMATIC rise in U.S. interest rates, I stand by my conclusion: as soon as China runs out of things to BUY with its U.S. Treasuries, it will STOP buying them.
On May 26 02:02 PM Mono wrote:
> Jeff- good read
>
> well...i actually read it. over the past few months i have been looking
> at a few ideas that keep being a thorn in my side. most importantly
> it is the fact that "china keeps buying US debt" starkly contrasts
> what i have been thinking for a long time. the US debt market is
> a joke- something that can be seen in the collapse of last week-
> and why there is any need for debt i can't understand. i know all
> the rebuttles of this and that and they need us as we need them,
> but that doesn't sit in my book. it is not correct. china not having
> any other options to invest in does hold mustard. so why are they
> buying it, because chinas TIC data DOES show that it is a growing
> holder. barring that all numbers can be fudged...what have i been
> missing that the billion people over there much smarter than me are
> not missing.
>
> then i read a few papers from overseas and it seems to make a little
> bit more sense. china is not buying treasuries. well...yes...they
> are but not really. there was a listing of about 100+ major sovereign
> wealth funds that have been doing heavy open business with china.
> there isn't much transparency of the workings, but the general gist
> is that china is using US debt as collateral for loans, basically
> dumping the debt. think about it- if you were 80% owner in a company
> and don't think things look could- how do you liquidate your position
> without affecting share price? china is buying US treasuries and
> then going and peddling them to hundreds of buyers who are enamored
> with US ratings and owning that paper. china is using the paper as
> collateral for loans- if they don't repay they loans who cares, the
> other country just holds onto the collateral and china keeps the
> cash. they are basically dumping treasuries...while making it look
> like they are still buying them. they are taking the cash and hoarding
> hard asset commodities.
>
> explains how they were also able to buy up 70% of the copper reserves
> in the world over the past three months- a feat that is equivalent
> to 11 years of copper usage in that country
>
> good article
You find only massive reserves, massive savings, massive underconsumption. This points to massive UNDER-leveraging which China is now changing with massive stimulus programs.
On May 26 12:32 PM CRK wrote:
> This entire concept is drivel. Everyone touted EM decoupling last
> year, seems to think that Chinese distored PMI numbers are a good
> thing and their support of the Yuan peg is a sign of strength. No
> one seems to see considered the perilous state of the chinese economy.
> Massive overleverage ala Japan in the 80's. 300 skyscrapes in Beijing
> alone, costing at a minimum 1.5 trillion. That is just Beijing, now
> consider the other key cities and ports built. MASSIVE commercial
> overleverage. Go visit Asia... easy to find a taxi in most key cities
> now.
China's rapid industrialization and acquistion strategy is designed to finally shake free its "developing nation" status. However, the human costs are excessive.
They are acknowledging the environmental impact though, with their plans for Dongtan, a new green city (cleanerairforcities.bl...)
Ultimately, China is flush with export profits and is diversifying. They will continue to consume US Treasuries, because they offer low risk (and low returns) and meet the Chinese state investment strategies. Additionally, US Treasuries will continue to hold its position as one of the most desirable instruments, even as the US begins its government-induced, hyper-inflation cycle.
On May 26 07:47 AM Uppai Mappla wrote:
> I still think that it is China being trapped under their excess capacities
> while rural China wallows in poverty, yet fully aware of the luxurious
> life in their cities. Chinese need to continue producing and exporting
> to prevent civil wars and take care of their soon-to-start-ageing
> population. US has nothing to lose except paper. We see here American
> long term economic policy in action, defined as follows:
> "If you've got them by the balls, their hearts and minds will follow."
>
>
> What would happen when the Chinese discover that they got worthless
> paper for their exports? Here's a possible scenario:
>
> "Meanwhile the timber was being carted away at high speed. When it
> was all gone, another special meeting was held in the barn for the
> animals to inspect Frederick's bank-notes. Smiling beatifically,
> and wearing both his decorations, Napoleon reposed on a bed of straw
> on the platform, with the money at his side, neatly piled on a china
> dish from the farmhouse kitchen. The animals filed slowly past, and
> each gazed his fill. And Boxer put out his nose to sniff at the bank-notes,
> and the flimsy white things stirred and rustled in his breath.<br/>
>
> 'Three days later ... a choking roar of rage sounded from Napoleon's
> apartments. The news of what had happened sped round the farm like
> wildfire. The banknotes were forgeries! Frederick had got the timber
> for nothing!
>
> 'Napoleon called the animals together immediately and in a terrible
> voice pronounced the death sentence upon Frederick. When captured,
> he said, Frederick should be boiled alive."
>
> - George Orwell, The Animal Farm.
much appreciated. thanks for taking the time to respond. time will tell.
great piece no matter what
Recently China bought up all the copper & iron ore in the world at rock bottom Buffet like prices - with its US dollars - probably by giving US 30yr Treasuries to commodity sellers.
Similarly did anyone notice the deafening silence of NO-ONE buying US assets unlike 1990s - neither the Arabs, Chinese/Asians nor the Europeans? This article clearly shows an exodus OUT OF US assets is underway.
Hilariously the US government is "selling Tbonds" to itself with QE. Also, Obama is going to tax US corporations' foreign assets and deferral loopholes!
This article is DEAD RIGHT and answered nagging doubts on what China "COULD DO". Now I understand it better. By liquidating long term tbonds and buying tbills they are WAITING for the other shoe to drop yet don't rock the boat by premature yuan appreciation. China will not tolerate losing $1T but if it it may be able to agilely manage a "mere" $100b of value loss as it becomes the #1 super power or reserve currency in its own right.
The point is China WILL BUY US assets to grow its economy at the 50% or 70% off sale. It will buy technology, marketing rights, raw materials, cheap food, cheap capital goods etc. when the US dollar is down heavily. Just like it bought tons of copper at $1+/lb. China WILL resume buying Tbonds when US govt has to shell out 7% or Volker-like 10% or more!
Now how to understand US policy? Do the ones truly in power behind the throne really care about the 50%-70% decline of US living standards. They are brokers and make money on change & TRANSACTIONS, not the level of wealth in US society.
You can tell they have accomplished a total re-positioning of their bets & assets clearly when the media starts singing the merits of a devasted US Dollar. Unfortunately US exports are barely 8.5% of its GDP yet future generations will have to pay high interest rates as the vast debt is rolled over.
We're going down, and we're taking China with us. We'll inflate our way out of our debts, which will hurt China. When a ponzi scheme ends, both the scam artist (the US in this case) and the players/victims (China) get hosed.
goods to America to forming its own Common Market type
of alliances with other Asian countries. They will take their time
doing that depending on how quickly the U.S. dollar is devalued
in an inflationary scenario. They are stockpiling strategic
commodities and negotiating new worldwide trade agreements
in order to support its long range vision of strategic alliances.
They are probably quietly trying currently to influence the Federal Reserve to buy their current Treasury holdings at whatever price the bond market can bear. I would not underestimate China.
They have been known throughout history as shrewd traders
except in those periods when they turned isolationist.
I am having trouble understanding some of your points:
You Said: "In other words, while China may be a net buyer of U.S. Treasuries in relation to its transactions with the U.S., on a global basis, China is spending its U.S. dollar holdings at least as fast as it is accumulating them. Does this look like China is “trapped”?"
Question 1: In the first part article of the article you say China is a net seller, then later on you say China is a net buyer of USTs. Which is correct?
Question 2: If China uses it's dollars to buy commodities, how is this going to help it maintain a dollar peg? Or, are you saying China is abandoning dollar sterilization ?
Question 3: This is a time of slumping employment in China, and possible political unrest from the growing ranks of the unemployed. If China abandons the dollar peg, they hurt their exports, and thus their unemployment increases. Why would they do this?
China will have to maneuver an exit out of the dollar very carefully – they have more at stake than the US itself. US is very happy to let the dollar devalue so they have to pay less. That is how the Japanese were ripped off. Yen had to appreciate about 200% against the dollar, US still wants the yen to appreciate more, but of course. Chinese would have learnt the lesson from Japan and will plan out exit. But what will the US do? I guess find the next sucker.
Since China is only buying treasuries, Fed is stepping in to buy the other asset classes, using somem of the same money. Typically money printing is a covert activity. But now Fed is out in the open with it – shows the desperation, and utter hopelessness of the situation.
US still is in complete denial, it has to fix its debt, consumption binge – budget and trade deficits. US needs a big recession to cut the fat out of the system and restructure itself. We are making no attempts to do that. Consumer confidence today simply tells you – we are very confident of continuing to borrow and consume. Debtor nations cannot be issuers of reserve currencies. That is how Britain lost its position, and US too will. One way or other it will end very badly. RIP.
When China gets the US dollars, what are they going to do with the "money"? If China keeps it in cash, there would be no interests, so it's better to use the cash to buy treasuries that earn extra.
An outflow of US dollars is good actually, because US doesn't have to pay the interest on those money.
btw, money is like stocks. Issuing more money will definitely dilute its value, but it might not necessarily depreciate its exchange rate in the long run. Every country is printing more money, anyway.
The treasury department issues debt to force spending(consumption). Fed sells debt to pull money out of the market. Those are two big machines controlling the flow of money.
If there is no capacity limitation on those machines, they can do what they want actually.
Unfortunately, California's machine is capped by its state law...
1) You didn't read my piece carefully enough: between China and the U.S., China is buying Treasuries - and then turning around and SPENDING those Treasuries buying HARD assets elsewhere around the world.
2) China will roughly stick with its current peg ONLY until inflation starts to heat up in the Chinese economy. At that point it will be forced to abandon the peg because high inflation is the 'worse of evils'.
3) "Slumping employment"? You're reading too much Bloomberg. Unemployment is MUCH lower in China than in the U.S. - and you should educate yourself about the strength of China's domestic economy ("Chinese consumers BEGIN to flex economic muscle" www.bullionbullscanada...)
On May 26 05:52 PM Living4Dividends wrote:
> Jeff N - Nice article. I agree with your general thesis (in fact
> I wrote an article in SA titled "Dollar is Doomed". I don't blame
> China for diversifying its reserves. They are buying commodities
> cheaply, and they will be able to consume this stockpile in their
> future industrialization. Pretty smart. I am sure they are also nervous
> about having all of their eggs in the UST basket, so they are diversifying
> into hard assets.
>
> I am having trouble understanding some of your points:
>
> You Said: "In other words, while China may be a net buyer of U.S.
> Treasuries in relation to its transactions with the U.S., on a global
> basis, China is spending its U.S. dollar holdings at least as fast
> as it is accumulating them. Does this look like China is “trapped”?"
>
>
> Question 1: In the first part article of the article you say China
> is a net seller, then later on you say China is a net buyer of USTs.
> Which is correct?
>
> Question 2: If China uses it's dollars to buy commodities, how is
> this going to help it maintain a dollar peg? Or, are you saying China
> is abandoning dollar sterilization ?
>
> Question 3: This is a time of slumping employment in China, and
> possible political unrest from the growing ranks of the unemployed.
> If China abandons the dollar peg, they hurt their exports, and thus
> their unemployment increases. Why would they do this?
Yes, I DO read alot of Barrons (and NYT and WSJ). I prefer to get my news from the more reputable, mainstream outlets like Barrons, NYT and WSJ. I am sure that you will berate my for preference for these sources, but I find them to me more reliable, accurate and less biased than something like bullionbullscanada.
NYT said: "China has been exchanging one dollar-denominated asset for another — selling the debt of government-sponsored enterprises like Fannie Mae and Freddie Mac in a hurry to buy Treasuries. While this has been clear for months, new data shows that China is also trading long-term Treasuries for short-term notes, highlighting Beijing’s concerns that inflation will erode the dollar’s value in the long run as America amasses record debt. "
The NYT article says that after all is netted out - it looks like China is a slight net buyer. Yes china is buying commodities, but the vast majority of their buying is of US short-term bills.
"China is strongly opposed to any significant appreciation or depreciation of its currency, Mr. Xu said at a press conference. But if international investors conclude that the Chinese economy has stabilized ahead of economies elsewhere, they may start pumping more money into the Chinese economy, he said."
So China continues to sterilize, but they are finding more creative ways to sterilize - which is an interesting development. It looks like the peg is safe for now.
On May 26 12:32 PM CRK wrote:
> This entire concept is drivel. Everyone touted EM decoupling last
> year, seems to think that Chinese distored PMI numbers are a good
> thing and their support of the Yuan peg is a sign of strength. No
> one seems to see considered the perilous state of the chinese economy.
> Massive overleverage ala Japan in the 80's. 300 skyscrapes in Beijing
> alone, costing at a minimum 1.5 trillion. That is just Beijing, now
> consider the other key cities and ports built. MASSIVE commercial
> overleverage. Go visit Asia... easy to find a taxi in most key cities
> now.
yes NYT is right - "China has been exchanging one dollar-denominated asset for another — selling the debt of government-sponsored enterprises like Fannie Mae and Freddie Mac in a hurry to buy Treasuries. "
This is exactly China's exit plan - stay in short durations and bide time. Fed meanwhile gets the same money (through Treasury) and turns around and buys Fannie debt.
There is also some talk of Chinese and Japanese wanting Yen and Yuan denominated US bonds - to preempt the feared devaluation.
On May 26 10:01 PM Living4Dividends wrote:
> Hi Jeff - Thanks for the detailed answers to my questions. I did
> read your piece and it was hard to follow - that why I asked the
> questions. While I was waiting for your reply, I did some research
> and came across the NYT article which explains the situation much
> more clearly www.nytimes.com/2009/0...
>
>
> Yes, I DO read alot of Barrons (and NYT and WSJ). I prefer to get
> my news from the more reputable, mainstream outlets like Barrons,
> NYT and WSJ. I am sure that you will berate my for preference for
> these sources, but I find them to me more reliable, accurate and
> less biased than something like bullionbullscanada.
>
> NYT said: "China has been exchanging one dollar-denominated asset
> for another — selling the debt of government-sponsored enterprises
> like Fannie Mae and Freddie Mac in a hurry to buy Treasuries. While
> this has been clear for months, new data shows that China is also
> trading long-term Treasuries for short-term notes, highlighting Beijing’s
> concerns that inflation will erode the dollar’s value in the long
> run as America amasses record debt. "
>
> The NYT article says that after all is netted out - it looks like
> China is a slight net buyer. Yes china is buying commodities, but
> the vast majority of their buying is of US short-term bills.
>
> "China is strongly opposed to any significant appreciation or depreciation
> of its currency, Mr. Xu said at a press conference. But if international
> investors conclude that the Chinese economy has stabilized ahead
> of economies elsewhere, they may start pumping more money into the
> Chinese economy, he said."
>
> So China continues to sterilize, but they are finding more creative
> ways to sterilize - which is an interesting development. It looks
> like the peg is safe for now.
On May 26 01:01 PM Moon Kil Woong wrote:
> CRK, I fully agree that people tend to believe that China is this
> great efficiency engine that is going to eat our lunch. Thay aren't,
> nor are they quietly plotting our demise. They are just trying to
> steer a command economy in disctressed times. That probably means
> hedging their bets any way they can. If the US is silly enough to
> think the rest of the world won't hedge their bets and buy endless
> resevoirs of US treasuries then the problem lies firmly in the US's
> hands not anyone elses.
>
> The simple fact is, too much $ and too many treasuries = inflation
> and higher bond rates. No one is forcing Treasury bond rates up on
> purpose besides the misguided administrations of Bush Jr. and Obama.
> Blame the real culprits not some strange foreign power that has been
> happy to fund your excesses for decades. They only funded them because
> they trusted that your economy was more stable than theirs. It's
> not a sign of dominence over America, or a sign that they have no
> choices. Their habit of buying Treasuries has largely been a sign
> of trust. That trust is now in question.
>
> Wouldn't you question someone's trust if they just made your long
> term investment in them loose 30% of it's value in less than a year?
> I would. So can you really blame them? Is this the act of someone
> really in control? The answer is no on both counts. Is their recent
> actions a signal things are changing? Does it not show they can be
> dollar risk adverse? The answer is yes on both accounts. They aren't
> in control and they don't need to be as heavily leveraged in US Treasuries
> as they have been before.
>
> We make America what it is. If we want to bankrupt ourselves it will
> solely be us who does it.
What is one to make of a statement as odd as:
"U.S. court-jester Ben Bernanke prancing around, braying about “green shoots”
Ben Bernancke? We talking about the same person?
You don't make an analytical case more persuasive by ridicule. Characterizing the FT as "spouting such drivel," says something about the author, and not much about the FT.
And you don't make it more persuasive with unsourced, dubious assertions about matters of fact:
"How exactly will the U.S. “fund” a deficit certain to exceed $2 TRILLION (just in the current fiscal-year"
US Budget deficit for 2009 is projected at $1.8 Trillion, much of which is "one-time" spending (eg TARP). I have not seen a projection that exceeds $2 Trillion for 2009, nor a projection anywhere near that figure for out years.
In short, a piece with a lot of emotion, and a few facts, and some factual claims which are quite obviously wrong.
The nature of the China/US relationship is obviously complex, and the imbalances that exist can't persist forever. Figuring out "what happens next" requires careful analysis and a lot of good data-- emotion isn't really helpful.
BullionbullsCanada.com?? and a piece written by the author himself? It's too bad because the piece was somewhat interesting until the author wastes our time by referring to another piece he had written, now the whole premise and motivation behind the piece is suspect.
However, what's the worry, it seems we are doing well without China. Tyler Durden published an article on SA in which he writes that the U.S. has committed to monetizing 1.75T of U.S. Debt. Who needs China to buy our bonds when we could just print a few Trillion and buy it ourselves?
On May 27 01:52 AM Fighting Yoda wrote:
> Living4Dividends :
> yes NYT is right - "China has been exchanging one dollar-denominated
> asset for another — selling the debt of government-sponsored enterprises
> like Fannie Mae and Freddie Mac in a hurry to buy Treasuries. "<br/>
>
> This is exactly China's exit plan - stay in short durations and bide
> time. Fed meanwhile gets the same money (through Treasury) and turns
> around and buys Fannie debt.
>
> There is also some talk of Chinese and Japanese wanting Yen and Yuan
> denominated US bonds - to preempt the feared devaluation.
>
On May 26 09:09 AM fireball wrote:
> we do not think like the chinese. because of language differences
> we can't. language forms thought patterns. we know they think in
> longer time span strategies. perhaps they follow "the art of war".
> the height of skill says you win without a single battle.
> how will our weak financial position affect our dealings with their
> ally north korea over the underground test and the short range missle
> tests. remember china now has icbm targeting capability thanx to
> the repayment of illegal donations for the clinton campaign. if i
> recall correctly the bush administration updated the tech.
> it looks to me like this recent developement will give gold a boost.
>
> we live in interesting times.
That's a bold assumption considering that the EU is China's biggest trading partner.
On May 26 07:05 AM jeandit75 wrote:
> China being the largest creditor of the U.S. Government, they can't
> afford to have a collaps in the USD cause it would wipe out their
> investment. The other reason why China must keep a strong dollar
> currency is the Yuan's undervaluation is working as a natural subsidiary
> to their exports, a natural competitive advantage they surely want
> to keep. I therefore can't see why China would shoot themselves in
> the foot in having a dollar collaps. That's that simple.
>
> I also find it quite funny to see everybody calling to buy gold.
> Look, there is no inflation right now. There is just speculation
> about the eventual weakness in the USD. This is driving gold and
> oil higher because they are paper and speculative markets.
>
> To verify my theory just check out the price of Nat Gas, which in
> my view is a much better indication of commodity inflation. It keeps
> on deflating. It is impacting the Utilities' profitability and is
> a proof that this current recession is driven by delevraging and
> deflation.
On May 27 12:36 PM optionsgirl wrote:
> Dear Jean- there is plenty of inflation, you just are not seeing
> it in your government-manipulated reports.I am surprised you are
> not feeling it in your every day life.
Is this country the reason for the real estate bubble?
Is this country the reason for the frauds in the financial markets?
Is this country the reason for the irresponsible actions of people in US corporations?
Is this country the reason for the loss of education results?
Is this country the reason for the drug problem in US?
Is this country the reason for the high level of consumptions (wastes) of resources?
Is this country the reason for the demise of the US auto industry?
Is this country the reason for the demise of any US industry? (Please bear in mind that mostly US companies are manufacturing and then selling the Chinese products in US, making money by pushing down costs?)
Should more people be interested to make comments, suggestions, and actions to correct these real issues, instead of judging and criticizing what one particular country is doing with its savings?
If U.S. wants to take account of irresponsible countries, why not at least also talk about countries involved with the troubled areas of the world such as Africa, Middle East, - - - Afganistan, India, Parkistan, - - - where there are real wars and terrorists fighting going on daily?
On May 27 12:47 PM Dean M wrote:
> One other naive question, if we are getting Yuan, Real, Yen, etc
> in exchange for worthless treasuries that pay no interest isn't that
> to our advantage when thos currencies are rising and ours is falling?
On May 27 01:25 PM doubleguns wrote:
> We are not getting those currencies. We are getting our dollars back.
>
On May 27 02:07 PM Dean M wrote:
> Aren't we using them while they are going up
Mono -
I appreciated the insight into China's buy/swap initiative as it relates to treasuries. Based on the source you cited, it would seem China has taken the role of "distributor" on behalf of the US, using its ethos with the rest of the world's market to peddle US treasuries as a favor to it's #1 buyer of exports--the US. In return, the US continues to buy China's cheap goods. It's a win-win for both the US (trying to fund its debt) and China (trying to feed its people). And, at the same time, China recognizes the USD is headed down, so it disposes of the treasuries to consume commodities for both its infrastructure and perhaps as a hedge against the US treasuries it chooses to hold. I'd say it's a brilliant strategy.
Do you mind sharing your source for the info you cited? Thanks a million (that might not be worth too much in a year, but it still has value now)! :)
On May 26 02:02 PM Mono wrote:
> Jeff- good read
>
> well...i actually read it. over the past few months i have been looking
> at a few ideas that keep being a thorn in my side. most importantly
> it is the fact that "china keeps buying US debt" starkly contrasts
> what i have been thinking for a long time. the US debt market is
> a joke- something that can be seen in the collapse of last week-
> and why there is any need for debt i can't understand. i know all
> the rebuttles of this and that and they need us as we need them,
> but that doesn't sit in my book. it is not correct. china not having
> any other options to invest in does hold mustard. so why are they
> buying it, because chinas TIC data DOES show that it is a growing
> holder. barring that all numbers can be fudged...what have i been
> missing that the billion people over there much smarter than me are
> not missing.
>
> then i read a few papers from overseas and it seems to make a little
> bit more sense. china is not buying treasuries. well...yes...they
> are but not really. there was a listing of about 100+ major sovereign
> wealth funds that have been doing heavy open business with china.
> there isn't much transparency of the workings, but the general gist
> is that china is using US debt as collateral for loans, basically
> dumping the debt. think about it- if you were 80% owner in a company
> and don't think things look could- how do you liquidate your position
> without affecting share price? china is buying US treasuries and
> then going and peddling them to hundreds of buyers who are enamored
> with US ratings and owning that paper. china is using the paper as
> collateral for loans- if they don't repay they loans who cares, the
> other country just holds onto the collateral and china keeps the
> cash. they are basically dumping treasuries...while making it look
> like they are still buying them. they are taking the cash and hoarding
> hard asset commodities.
>
> explains how they were also able to buy up 70% of the copper reserves
> in the world over the past three months- a feat that is equivalent
> to 11 years of copper usage in that country
>
> good article
That raises a question I'd like to see someone who has access to (and understanding of) the numbers to address.
Right now, our federal government operates largely on borrowed money, borrowing from Peter each year to pay Paul. Interest on our debt now consumes something approaching 20 percent of tax receipts, if I remember correctly. And we now have a situation where receipts are going down due to a declining economy, but expenditures (and borrowing) are going up tremendously at the same time, in an effort to stem the economic slide.
I haven't seen anyone talking about a balanced budget in many years, much less of running surpluses and starting to retire our debt.
An inevitable consequence of an ever-increasing debt load is that higher interest rates must be paid to get people to lend to you, because you are a riskier borrower.
So my questions are these:
1 - If the world suddenly decided we were too large a credit risk and refused to lend us any more money, how much would our government be forced to shrink if it could spend ONLY what it collected in taxes each year? (Bear in mind that government expenditures are a huge chunk of the economy, and that curtailing those expenditures would in turn reduce economic activity and productivity - as would raising taxes to cover the budgetary shortfall). If we're now funding 25 percent of each year's budget with borrowed money, that 25 percent would obviously have to come right off the top. But that cut would also shrink our economy and require even further cuts. So what would the total reduction be? I'm guessing somewhere between 30 and 50 percent, by the time it washed through our system - but that's just a guess. Maybe it's less. Or more.
2 - On the contrary, assume that we will continue to have unlimited borrowing capacity and we can continue to add to our total debt year after year. At the rate our debt is now growing, I could easily envision $20 trillion of total outstanding debt within 3 to 5 years. If it took 20 percent of our revenue to make the interest payments on our debt when it was $8 trillion, what percentage of our revenue would be required to service a $20 trillion debt? And if the interest rates we are forced to pay go up, say 50 percent - or double, how much then? Since each dollar paid in interest on our debt is a dollar which is no longer available to fund federal programs, our government will necessarilly be forced to shrink itself as its debt grows. So at what point will debt service consume 100 percent of the government's receipts (essentially forcing the government to either default or disband)?
I've been reading "borrowed" research papers for days (80% are completely stolen, if only a chunk here, a chunk there; 15 percent are very badly written; and 5% are from the few students who show real promise) and my take on the whole of American life is that we're lost to dishonesty and incompetence. We live in a society of greed. The mantra is "Get rich quick, no matter who or what you trample in the process." The bad quality of prose in responses ought to give you a clue to people's investment in self-education.
I'll follow your blog, as I think you've got some intelligent insights, but I'm not convinced anybody will take your advice. Americans are all locked in greed or survival mode, now.
On May 27 10:50 PM Djinni wrote:
> You sound like an English teacher! Of course, nobody reads the stuff;
> people use the comment forums to post their own propaganda, just
> as students hand in bogus term papers to test their luck with teachers'
> tolerance for the easy pass. Many of my students haven't even read
> the downloaded papers they hand me. I get that when I ask them questions
> about "their" arguments in draft conferences. Similarly, most responders
> don't pay attention to the content of your post. They're trawling
> for readers for their own blogs.
>
> I've been reading "borrowed" research papers for days (80% are completely
> stolen, if only a chunk here, a chunk there; 15 percent are very
> badly written; and 5% are from the few students who show real promise)
> and my take on the whole of American life is that we're lost to dishonesty
> and incompetence. We live in a society of greed. The mantra is "Get
> rich quick, no matter who or what you trample in the process." The
> bad quality of prose in responses ought to give you a clue to people's
> investment in self-education.
>
> I'll follow your blog, as I think you've got some intelligent insights,
> but I'm not convinced anybody will take your advice. Americans are
> all locked in greed or survival mode, now.
Well then, what will China do with the dollars it earns in trade surplus every year? What? What? jeez.
On May 26 01:01 PM Moon Kil Woong wrote:
...Blame the real culprits…your excesses…your economy. We make America, (United States), what it is…
However, I believe you have hit at the heart of the matter…Trust.
I can’t help but believe somewhere between the nationalistic fervor, the “he said / she saids” and the “mutual respect” / “partnership” rhetoric, lies a basic distrust between nations. Last time I checked, the US distrusts China’s record of honoring copyright / trademark / patent law as not being applicable to their country. Perhaps this is some kind of payback by some of the most powerful companies in the US in righting this “wrong”. Don’t know for sure, just thought I’d throw it out there.
Undoubtedly China will continue to grow in importance on the world stage, unless of course they have another revolution. Will they overtake America as the dominate power in the world? Certainly not for the foreseeable future. Betting against the United States, as we seem to love to do in this country, has always been a suckers bet in the long term, and will be this time.
On May 26 03:39 PM 5142152-337 wrote:
> Mono--good points.
>
> My take on China is this: They think DECADES ahead--and always have!.
> Unlike we Americans that think about what we are having for dinner,
> or can we screw our neighbor tonight AFTER dinner.
>
> China will--in time--be controlling this country's wealth, since
> we are systematically GIVING it to them!
>
> Buy gold and silver, a safe, and a gun. Radical? No, just realistic.
> Oh, don't forget to order the Mandarin CD!
Please explain. Maybe I'm just not sophisticated enough to understand.
In fact, when you factor in an increased government take through taxation the average disposable income is getting ever tighter.
On May 27 12:36 PM optionsgirl wrote:
> Dear Jean- there is plenty of inflation, you just are not seeing
> it in your government-manipulated reports.I am surprised you are
> not feeling it in your every day life.
However, it CAN (and has) been engaging in frequent "currency swaps" and related activities with its trade-partners (i.e. commodity producers). Thus China can exchange U.S. Treasuries (or "sell" them, if you prefer) to other countries - taking that country's currency, in return.
Then, China uses THAT currency to buy commodities. Thus the issue of whether China can "buy" commodities with U.S. Treasuries is (in fact) nothing more than a game of semantics.
Regarding the criticisms that I'm either OVER-STATING China's strength or the U.S.'s weakness, I COULD provide dozens of links on what I've written previously. To condense this reading list, I'll just offer ONE recent comparison: A Tale of Two Economies: China vs. the U.S." (www.bullionbullscanada...).
I would ask critics to actually READ this, and then see if they wish to repeat those criticisms.
Gas prices have been going up. Is that deflation?
"To verify my theory just check out the price of Nat Gas, which in my view is a much better indication of commodity inflation. It keeps on deflating."
Your theory stinks. The reason natural gas is down is because of a massive oversupply. But thanks to quantitative easing, it's now forming a bottom. See UNG.
On May 26 07:05 AM jeandit75 wrote:
> China being the largest creditor of the U.S. Government, they can't
> afford to have a collaps in the USD cause it would wipe out their
> investment. The other reason why China must keep a strong dollar
> currency is the Yuan's undervaluation is working as a natural subsidiary
> to their exports, a natural competitive advantage they surely want
> to keep. I therefore can't see why China would shoot themselves in
> the foot in having a dollar collaps. That's that simple.
>
> I also find it quite funny to see everybody calling to buy gold.
> Look, there is no inflation right now. There is just speculation
> about the eventual weakness in the USD. This is driving gold and
> oil higher because they are paper and speculative markets.
>
> To verify my theory just check out the price of Nat Gas, which in
> my view is a much better indication of commodity inflation. It keeps
> on deflating. It is impacting the Utilities' profitability and is
> a proof that this current recession is driven by delevraging and
> deflation.
"My folks bought a color TV in 1965 for 600 dollars ,that same size color tv can be bought at wal mart for 199"
That's not deflation, that's a technological improvement. Nevertheless, that $600 TV will have lasted 30 years, whereas the $199 wally special will last about five.
"My first baseball glove was 29 dollars and my daughter got hers 38 years later for 9 dollars"
And that $9 baseball glove will have to be replaced sooner than the $29 glove. Cheaper products do not necessarily equal a greater value.
If we used honest money, things would get cheaper over time thanks to technology. Over the last few centuries we have been able to produce a lot more for a lot less work, and what do governments do? Print the difference and then some.
On May 28 02:19 PM dividendmachine wrote:
> Thios is hardly news but the author did a great job
>
> However my "theory" is the following. We both agree that the "golden
> rule" is he who has the gold makes the rules"
>
> Invariably China is concerned about the "socialist" government that
> Obama is proposing. It is in everyones best interest worldwide that
> the US has a strong economy and perhaps they sent Obama a message
> by pulling out of treasuries
>
> The only way that can happen is with lower interest rates and a healthy
> stock market
>
> Consumer confidence jumped from March to April
>
> and that is in spite of the unemployment rate rising.
>
> FACT is more than half this country and those who control over 90%
> of the assets own stocks.
>
> In January and February Obama "needed" to sell doom and gloom to
> get through his stimulus
>
> The fact is China DECIDES America's fate now. Bernanke and Obama
> and Geintner are merely figureheads with little control
>
> China needs America not only as the only people on Earth stupid enough
> to buy all the useless shit produced but there is another reason
> as well
>
> America is a conveinent "bogeyman" for teh rest of the world. In
> fact China would have that role if the US was to collapse
>
> Those in power in China have "no choice" but to keep financing their
> debt.Where else can you put a trillion dollars?
>
> Truth is that America has had inflation for 60+ years since WW2 ,and
> gradual inflation is a LOT better than deflation
>
> Each industry has been effected differently
>
> What we are not taking into consideration is how much the price of
> many goods we buy has gone down in price
>
> My folks bought a color TV in 1965 for 600 dollars ,that same size
> color tv can be bought at wal mart for 199
>
> My first baseball glove was 29 dollars and my daughter got hers 38
> years later for 9 dollars
>
> 28 years ago a quarter pounder with cheese was 1.15 and now its about
> double
>
> Gas when i was a senior in hi scholl was 2.09 30 years later its
> now 2.35 .when you add the large increase in fed and state tax the
> oil company is getting Less money for the barrell of oil
>
> Levis now cost less than they did 30 years ago
>
> Now somethings like concert tickets have ballooned
>
> 28 years ago i saw the rolling stones for 15$ ,23 years later the
> same ticket was 225 dollars
>
> Cadillac because of the UAW and managements greed has increased in
> the past 30 years by more than 400%
>
> 2 large pizzas are almost the same as they were 30 years ago
>
> In my hometown a house that sold for 52 ,000 dollars 27 years ago
> just sold for 68,000 but 3 years ago the same house was 120,000<br/>
>
> My point is despite the inflation that has happened in the past 30
> years,Each industry has varied in how it has changed
www.treas.gov/press/re...
These are the monthly inflows in the last quarter of 2008. The net inflows were 273.1,61.3,74.0 in Oct,Nov&Dec respectively; a total of 408.4B for Q4 2008.
www.treas.gov/press/re...
The TIC data for Jan-March 2009 showed inflows of -143.5 -91.1 23.2, a total of -211.40B for Q12009.
So over the last two quarters the net-inflow has been 197B. The number for Sep2008 was 142.7, taking the total to 339.7B since Sept08.
Were the outflow in Q109 is a readjustment after the rush to safety last Fall? Also note that the inflow went positive in March in spite of the Fed's Quantitative Easing Policy.