China now #1 U.S. creditor
Don't look now, but China has just displaced Japan as the leading holder of U.S. Treasury debt.
The latest numbers show China now holding $585 billion in Treasury paper — about 20% of all Treasury paper in foreign hands, and 10% of the total both foreign and domestic. And since Treasury doesn't keep tabs on who holds its paper domestically, China is likely Uncle Sam's biggest creditor, period. (In fact, those percentages might be higher still since rumor is that China buys additional Treasuries through other countries.)
So there you have it: Beijing is financing no small portion of the $700 billion bailout.
Sort of puts things in a different perspective when you hear the new president saying essentially, "Damn the deficits, full speed ahead." If someone like David Walker can't convince him a trillion-dollar deficit is a problem, the Chinese certainly will if they decide they don't want to keep financing that trillion-dollar deficit at record-low interest rates.
At that point, the new president will learn the same lesson Bill Clinton did, when he hissed in disbelief, "You mean to tell me that the success of the [economic] program and my reelection hinges on the Federal Reserve and a bunch of f—–g bond traders?"
As long as the power elite remains in thrall to Alexander Hamilton's notion that a national debt is a "national blessing," yes.
Sphere: Related Content
When the Chinese move to take back Taiwan by force, the United States had better hang back, cuz they will have all the leverage !
Comment on November 19, 2008 @ 12:14 pm
Do you really think Al Hamilton ever imagined this country being in hock for $Trillions to foreign nations? And if the likes of Hamilton had been making U.S. economic policy for the last decade or two, we sure as hell wouldn’t be dependent on Communist China for anything! I would take John Adams, Al Hamilton and the rest of those early Federalists over the scoundrels and weasels who govern this country these days.
Comment on November 19, 2008 @ 12:22 pm
Mr. Miller:
No, but only because he thought that fiat money had been outlawed by the Constitution and therefore it could never get to that point.
Every financial woe associated with the national debt, I lay at Hamilton’s feet. It matters not that he could not have seen *this* outcome, what matters is that an outcome involving debt monetization is inevitable if you allow a debt at all. Negligent homicide carries a lighter penalty than first-degree murder, but the victim is just as dead.
Comment on November 19, 2008 @ 12:47 pm
Didn’t Clinton make noises towards Japan during the memory chip embargo? Let’s say for comparison like Obama and the ‘damn the deficits’ thing. And, after Japan sat out two months of Treasury auctions, was there a miraculous turnaround and Clinton didn’t have a bad thing to say about Japan (at least not in public) for the rest of his tenure as President? China doesn’t matter until they exercise their right NOT to buy Treasuries. At that point we get another revelation in D.C. and you either get higher interest rates, hefty discounts or amazing spending cutbacks.
Comment on November 19, 2008 @ 12:58 pm
just keep in mind that the chinese are actually subsidizing us with cheap debt. They have an ulterior motive, but who knows if they will achieve it. They are subsidizing us in the present and indefinite future. A future goal of economic preeminence may or may not be in their distant future. Enjoy the subsidy. There’s nothing we can do to stop it, and there’s nothing the Chinese will do to stop it. Things would be far worse without this easy credit and in the long run we are all dead.
Comment on November 19, 2008 @ 1:55 pm
LTC at 8 percent yield and 10 percent debt to equity ratio. You gold bugs better start grabbing some of this loot. Sales like these don’t last forever. No matter what the government is not going to throw granny out of the nursing home, and most people living in assisted living and retirement communities (not the nursing home) tend to have steady incomes such as annuities and social security and are not dependent on the equity market. All of these types of long term care facilities will be around forever no matter what happens to the economy in the short and medium term.
Comment on November 19, 2008 @ 1:57 pm
And if someone is tempted to say, well let’s just screw the chinese and default on the debt, please remember we’ve never been in hock to someone with lots of deliverable nukes. We could screw the french (and the rest of the europeans) in 1971, but we do not have that option again.
We do have the option to stop spending outrageous sums of money on useless spending, failouts and all other forms of sanctioned stupidity. That is the bigger paradigm shift that needs to take place.
Before the election, a friend and I were discussing possible outcomes, and he brought up the possibility of no election/inauguration whatsoever. He gave a 5% chance of a “transitional military authority” taking over in case of some Cheney-inspired Dr Strangelove moment or an assassination of the candidates. [I suppose I can't rule anything thing out til Jan 20th]. He said this outcome, tho unlikely, would be the only acceptable format for scrapping the old system and getting rid of subsidies for condoms in Angola, etc.
I don’t want to agree with that viewpoint, but after all the excrement hitting the fan in the last couple of months, I feel like someone trying to appeal to the rational nature of the drunk [politicians] behind the wheel who’s driving us all home. Maybe it’s time to take the keys away? Yeeegh.
Comment on November 19, 2008 @ 10:36 pm
Invisigoth
In 1971 the French had deliverable nukes. On the other hand, the US had next assets outside the US until around 2000. After 2000 we were spending other people’s money.
So if the Narcotrafficantes, the Eurotrash, the WaBenzi, the Red Tape Wallahs, the Red Princes, the Nomenklatura, the Triads, the Yakuza, and the Sheihks are pissed at us, we know who to blame, (or praise).
Comment on November 20, 2008 @ 2:59 am
Invisagoth
In 2008 there are many US biotech companies that could each inidividually produce virus designs capable of wiping out 99% of the population of the world.
I am sure that if the US (and other countries) had cities that started disappearing, that these companies could sell vacines to every country in the world that could afford them, and produce sufficient surplus vacines to take care of countries that could not afford to purchase them due to poverty or whatever.
However I am at a loss as to what other ways the US could finance our present debt. Selling off overseas assets would have worked very well in 1971, because we had large quantities of overseas assets. Since 2000 our overseas assets have not been as great as our overseas liabilities.
Pity we did not allow the dollar to devalue in 2000 by taxing overseas purchases of US assets such as treasury bonds.
We would have had our inflation come in gradually and produce a manufacturing boom, instead of all at once and produce a manufacturing catastrophe.
Comment on November 20, 2008 @ 3:25 am
[...] none of this is surprising to those of us aware that China is now the biggest foreign holder of U.S. Treasuries. None of it is surprising to those of us who know that, well, as the Chinese [...]
Pingback on December 4, 2008 @ 9:45 am