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  • China Hiding Treasury Purchases

    China’s reported holdings of U.S. Treasury bonds fell sharply again in June and are now almost $100 billion lower than they were in July 2009. The press reports this as meaningful and important. It isn’t.

    You may have noticed that American interest rates are not soaring; in fact, they’re at historic lows. One reason they’re not soaring is because, contrary to widespread assertions, American interest rates don’t depend on the PRC.

    The other reason is, over the same period, reported British holdings of U.S. Treasuries rose $265 billion. Why would the UK increase its holdings 273% in 11 months, when the yield on Treasuries is close to zero? The answer: China’s State Administration for Foreign Exchange (SAFE) has an office in London. When purchases are made through that office, they are initially counted as purchases from Britain, not China.

    SAFE’s goal is to reduce China’s visible dependence on the United States. It is motivated by domestic political pressure within the PRC. Just as many people here think China holding American bonds makes the United States dependent on China, many people in China think holding U.S. bonds leaves the PRC hostage to American policy that could reduce the bonds’ value. SAFE is trying to hide some of China’s bond holdings by routing them through Britain.

    SAFE obscures things – it’s a tool of the Communist Party. The problem is on the American side, where the Department of the Treasury reports monthly information on bond ownership known to be inaccurate. Treasury also publishes much better figures, but only once a year and late. The most recent figure from this more accurate data dates back to June 2009. It shows China’s bond holdings at $1.46 trillion, far above the initial figure from Treasury of $916 billion for that month.

    The problem is not that China is selling American bonds; it almost certainly isn’t. The problem is it takes too long to find out who actually is selling and buying our bonds.

    Posted in International [slideshow_deploy]

    5 Responses to China Hiding Treasury Purchases

    1. Carol says:

      When are the American People going to wake up. China has now overtaken the economy of Japan and they are going full force at increasing their military strength. If we do not get the big spenders out of DC we will be learning to speak the Chinese language!!

    2. Pingback: August 18, 2010 : Contemporary Analysis

    3. Spiritof76, NH says:

      Please stop talking about China. We are a banana republic. We print and borrow money like there is no tomorrow. The government deficit has skyrocketed to $1.4T in just one year-10% of the GDP.
      Worrying about China is like a debtor worrying about where the creditor is keeping his money. Why can’t we get it through our heads that the US is bankrupt. Just tell us where are we earning all this money that we are spending.

    4. Lynn Bryant DeSpain says:

      First we rid ourselves of all in Washington that are Progressive and Liberal, and replace them with fresh thinking, Constitution based, new blood.

      Next, America, places a tarrif on all Chinese goods imported to the United States, while at the same time, giving Federal and State Land to manufacturers of everykind, that employ American Citizens, and include considerable tax breaks both Federal and State.

      Then remove all American export duties, fees and taxes of American made products shipped anywhere in the World, thus making our products more competetive with all Nations.

      Remove unfounded, unscientific based restrictions on all American manufacturing, involving Air, Earth, and Water. And do this very quickly.

      Similtaniously, undo all unconstitutional, and all additional tax,fee, and other charges placed on American Citizens and American Businesses.

      Remove NAFTA. Remove the all North American Trade Agreements, as they serve no benefit to to citizens of the United States.

      Remove all Illegal Aliens and their children, as those born to Illegals do not qualify to be considered American Citizens, as do those born to Legal Immigrants. This solves the undo buden placed on most every State in the Union through the Social Systems, police, Courts, jails, et al. This also allows job opennings for the 80,000+ Military who are returning from War to a 10.5% current unemployment rate. This has been done twice before after both World Wars with Illegals and needs to be done again, and for the same reasons.

      Drill and refine our own oil and gas, and allow it to be done on all Federal and State Lands, for they are owned by the Citizens. This can be done through Leases or Profit sharing. Allow Reineries to be built on all State and Federal Lands for the same reasonings. This completely stops America's dependence on any outside Oil and fuel. America has at least a century of oil, and two centuries of gas, and neither are a fossil fuel.Neither have any actual effect on our atmoshere either. Check with the real scientists.

    5. Mitch Rodell, Washin says:

      The anti-illectual radicals that form the base of the conservative viewership for the Heritage Foundation are a tarnish on the institution's strong intellectual foundations and great thinkers, Lynn DeSpain's draconian and economically disastrous proposals as evidence

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