Posted on 12/19/2009 5:25:52 AM PST by TigerLikesRooster
Harder to buy US Treasuries
Created: 2009-12-18 0:13:35
Author:Zhou Xin and Jason Subler
IT is getting harder for governments to buy United States Treasuries because the US's shrinking current-account gap is reducing supply of dollars overseas, a Chinese central bank official said yesterday.
The comments by Zhu Min, deputy governor of the People's Bank of China, referred to the overall situation globally, not specifically to China, the biggest foreign holder of US government bonds.
Chinese officials generally are very careful about commenting on the dollar and Treasuries, given that so much of its US$2.3 trillion reserves are tied to their value, and markets always watch any such comments closely for signs of any shift in how it manages its assets.
China's State Administration of Foreign Exchange reaffirmed this month that the dollar stands secure as the anchor of the currency reserves it manages, even as the country seeks to diversify its investments.
In a discussion on the global role of the dollar, Zhu told an academic audience that it was inevitable that the dollar would continue to fall in value because Washington continued to issue more Treasuries to finance its deficit spending.
He then addressed where demand for that debt would come from.
"The United States cannot force foreign governments to increase their holdings of Treasuries," Zhu said, according to an audio recording of his remarks. "Double the holdings? It is definitely impossible."
"The US current account deficit is falling as residents' savings increase, so its trade turnover is falling, which means the US is supplying fewer dollars to the rest of the world," he added. "The world does not have so much money to buy more US Treasuries."
China continues to see its foreign exchange reserves grow, albeit at a slower pace than in past years, due to a large trade surplus and inflows of foreign investment. They stood at US$2.3 trillion at the end of September.
Ping!
He’s not the only one having trouble finding (or hanging on to) a few dollars!
China does not want to be shot point-blank. However, it will be shot. Just not at point-blank range.
[sarc]
So you mean the law of supply and demand is still working? Wow, who would have thought that?
[/sarc]
If we can spend out way out of recession, borrow our way out of debt... surely we can print our way out of lack of treasury buyers.
The current account measures the amount of money the United States must raise abroad to finance its economy. The United States, because of huge merchandise trade deficits, was transformed from the world’s largest creditor nation to the largest debtor country in the 1980’s.
Simply put, that means that foreigners now own more assets in the United States than Americans hold overseas. Administrations have contended that this is a sign of strength, showing faith in the United States as a place to invest.
Private economists have warned, however, that the growing debt burden will ultimately lower America’s standard of living as more dollars are handed over to foreigners as interest payments on the debt.
Expect this to be the mantra now that the healthcare crap is secured.
Yup. What he means is the US economy is in the dumps so US consumers can’t buy as many foreign “goods” as they could a couple of years ago. Foreign nations use that (for US is a deficit) surplus to finance purchases of US T-Bills and bonds.
So when Americans tighten their belts, Chinese can’t control as much of our economy. They shouldn’t worry, though, with US spending out of control and record levels of debt being auctioned each month, there are plenty of other chances for foreign investors to buy USD monopoly money.
I’m thinking the era of buy now-pay later is over , or at least for all but the top 30% or so; I think people like myself that have always had readily available credit are going to lookong at government spending with cold hard eyes for a very long time.
Ahh good it’s critical mass.
Sooner or later, the piper must be paid. IOUs will no longer be accepted..................................
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