China Rejiggers U.S. Treasury Mix (Putting themselves in position to "exit quickly")

Wall Street Journal ^ | 1/20/08 | David Gaffen

[Golddigger3]

Economists worried about the U.S.’s ongoing need for China to buy U.S. assets to fund current-account imbalances watch capital-flow data while biting their nails.

As it turns out, in November, China finally did start to reduce their purchases of long-term U.S. debt, but for now it is difficult to explain why. After all, China increased short-term holdings, and it remains the largest holder of U.S. Treasurys, with $681.9 billion.

The U.S. Treasury’s international capital statistics showed that in November, China’s net holdings of long-term U.S. Treasury securities fell by more than $9 billion. However, the country’s short-term holdings rose by $38.2 billion. Determining the motivation here is difficult — it could simply be that China followed the rest of the crowd in jumping headlong into the safest securities possible, or more worrisome factors could be at stake.

“When any creditor shortens the term structure of its holdings, the borrower should probably be cognizant of that, because the creditor is giving up yield to give itself the option of exiting quickly,” says Brad Setser, fellow at the Council on Foreign Relations . . .

[PGR88]

As our largest “investor” China must have some opinion on the Obama/Pelosi/Frank to spend Trillions on stimulus. Certainly if I owned 5-10% of the entire debt of any company, I would want to be in their boardroom when major decisions are made.

I would love to know what it is, but they certainly have kept their comments quiet.

[ASOC]

Reports show South Korea bailing on US T notes.

I wonder who will be next - and will that info be shared publically?

[Usually_Disappointed]

The U.S. Treasury’s international capital statistics showed that in November, China’s net holdings of long-term U.S. Treasury securities fell by more than $9 billion. However, the country’s short-term holdings rose by $38.2 billion. Determining the motivation here is difficult

Difficult? Now let me see. What happened in November that could effect the economy in a profound way?

Elections have consequences...

[Golddigger3]

Here’s a YouTube video of the Fed Vice-Chaiman refusing to tell a congressman who exactly received 1.4 trillions dollars, and admitting that we PAY foreign countries to buy our treasuries.

http://www.youtube.com/watch?v=Mj0JAfq4esk

[Golddigger3]

Please see the video on post # 5

[Toddsterpatriot]

and admitting that we PAY foreign countries to buy our treasuries.

Where do you imagine he said that?

[April Lexington]

This is very troubling. If we can't find buyers for the upcoming trillion dollar bond offering, the stimulus bailout (or whatever you call the pending scam) won't happen unless the Treasury agrees to MUCH HIGHER interest rates so they can sell the bonds and raise the money.

Brace yourself for some rough sailing in the money markets as interest rates soar. Remember 1981???

[April Lexington]

Its like musical chairs. When the music stops, you had better have your fanny hovering over a chair or...you lose!

[markomalley]

With uncontrolled debt on the horizon (spell that “the Child (piss be unto him)” plus “Stretch”), I’d say that there are only two options:

- Massive devaluation of the dollar (get out of debt via printing press) or

- Default

Either way, I can’t blame the Chinese a bit: T-Bills don’t appear to be a good investment to me, either.

[GOPJ]

China’s probably in short term treasuries for the same reason the rest of us are - we see inflation down and road and don’t want to lock in low rates...