This is VERY bad news. The largest decline in foreign holdings on record? The Treasury needs to borrow $3.5 trillion this year and next, if China and Japan are net sellers who is going to lend us the money? The answer is the Federal Reserve. They will continue to print money and buy U.S. debt. How can a collapse of the dollar and rampant inflation be avoided??? Got Gold?-Lou
Foreign demand for Treasury securities falls
Foreign demand for US Treasury securities falls by record amount as China reduces holdings
WASHINGTON (AP) — The government said Tuesday that foreign demand for U.S. Treasury securities fell by the largest amount on record in December with China reducing its holdings by $34.2 billion.
The reductions in holdings, if they continue, could force the government to make higher interest payments at a time that it is running record federal deficits.
The Treasury Department reported that foreign holdings of U.S. Treasury securities fell by $53 billion in December, surpassing the previous record of a $44.5 billion drop in April 2009.
The big drop in China’s holdings meant that it lost the top spot in terms of foreign ownership of U.S. Treasuries, dropping to second place behind Japan.
Japan also reduced its holdings of U.S. Treasuries, cutting them by $11.5 billion to $768.8 billion in December, but that amount was still more than China’s December total of $755.4 billion.
The $53 billion decline in holdings of Treasury securities came primarily from a drop in official government holdings, which fell by $52.3 billion. The holdings of foreign private investors fell by $700 million during the month of December.
For all of 2009, foreign holdings of U.S. Treasuries dipped by $500 million. In 2008, foreigners had increased their holdings of U.S. Treasuries by $456 billion as a global financial crisis triggered a flight to the safety of U.S. government debt.
That flight to safety had driven down the interest rates that the government was having to pay on its debt to record lows with rates on some short-term securities dipping into negative territory for brief periods.
The Obama administration on Feb. 1 released a new budget plan which projects that the deficit for this year will total a record $1.56 trillion, surpassing last year’s record of $1.4 trillion deficit. The trillion-dollar-plus deficit have been caused by a deep recession, which has reduced government tax receipts, and the massive spending that has been undertaken to jump-start the economy and stabilize the financial system.
The administration has pledged to begin addressing the huge government deficits with Obama saying he will soon appoint a commission to recommend ways to trim future deficits.
Overall, the Treasury Department said that foreign net purchases of long-term securities totalted $63.3 billion in December, down from $126.4 billion in November. This category covers Treasury securities and private company bonds.
China’s holdings are a result of the huge trade deficits the United States runs with China. The Chinese take the dollars Americans pay for Chinese products and invest them in Treasury securities and other dollar-denomina ted assets.
American manufacturers argue that China’s huge dollar reserve reflect a strategy by the Chinese government to keep its currency artifically low against the dollar as a way to boost Chinese exports and dampen demand in China for American products.
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So is this what would get Uncle Ben to finally raise the damned interest rates?
Also, I’m not so sure all those people that bought gold via some “certificate” will ever see it in true metal form, there may not be any available, or at least not to all that hold the “paper”
And if you do have it, how much you think will be worth the effort? and do you even have a safe big nuff to protect any “large” amount?
Besides, why would anyone with this metal even think about selling it? if its gona be the only thing available for transactions. And if it is, how would you pay your bills? scrape off x amount of dust and mail it in with your bill? and if you do on line banking, how you gona send it through the wire or air, smirks.
Somehow this all is a bit illogical.
Through out the time of man there have always been problems of survival, but man seems to continue to populate, even in the concentration camps there were baby’s born, unbelievable but true. I’m sure at the fall of the Roman Empire the people figured it was “the end”, or during the plague.