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| China-Japan-Koreas |
| "The world does not have so much money to buy more US Treasuries." |
| 2009-12-20 |
| 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. |
| Posted by:tipper |
| #6 Hi phil_b, Apologies for my being so dense, but could you please expound on your words, "International currency flows are always automatically in balance. There is always enough USD outside the USA to buy treasuries to fund the trade deficit.* Although not of course the budget deficit". Not being an economist, I'd just like to understand the nuance of your words. Thank you, Sir. |
| Posted by: Asymmetrical Triangulation 2009-12-20 21:07 |
| #5 "The world does not have so much money to buy more US Treasuries." I think he is saying China's surplus has peaked and is now falling. International currency flows are always automatically in balance. There is always enough USD outside the USA to buy treasuries to fund the trade deficit.* Although not of course the budget deficit. * Excepting hoarding of USD by drug cartels etc. |
| Posted by: phil_b 2009-12-20 10:30 |
| #4 That's ok - We'll just print more. After all -- we still have checks left! That's what the Treasury has been doing when it can't sell bonds, it in turn buys them with more printed money. The bonds mitigate the debt over a number of years [hoping inflation will eat some of it] whereas the purchase makes the debt and debasement of the currency immediate. |
| Posted by: Procopius2k 2009-12-20 09:13 |
| #3 If you owe the bank $100,000, you have a problem; if you owe $2.3 trillion the bank has a problem. |
| Posted by: Glenmore 2009-12-20 08:51 |
| #2 That's ok - We'll just print more. After all -- we still have checks left! |
| Posted by: CrazyFool 2009-12-20 08:36 |
| #1 Yeah, well we know the world is financially screwed, what else is new. Don't buy the bonds, treasuries and financial instruments and you will kill the ONEs programs. You would not do that to a fellow "Progressive" would you ? |
| Posted by: Ebbineng Untervehr1947 2009-12-20 06:57 |