A Myth Laid To Waste!!! Interesting US Bond Purchases!!! What Does It Mean?

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I found this interesting, quizzical, and an opportunity to inject some reality into some false beliefs of many Americans. 

Foreign holdings of US Treasury debt hit record in December

WASHINGTON (AP) — Foreign holdings of U.S. Treasury securities rose to a record level in December despite investors in China and Japan, the two biggest foreign owners of Treasury debt, cutting back on their holdings.

The Treasury Department says foreign holdings increased 0.7 percent in December to a record $6.15 trillion following a 0.9 percent increase in November. Total holdings had fallen in both September and October.

China, the No. 1 holder of Treasury debt, trimmed its holdings by 0.5 percent to $1.24 trillion, while Japan, the No. 2 foreign buyer, cut its holdings 0.9 percent to $1.23 trillion. Offsetting those declines, holdings by Britain rose 8.4 percent, while holdings by oil exporting countries rose 2.5 percent.

The expectation is that demand for Treasury securities will remain strong this year.

It’s a bit irksome to read crap articles like this.  It’s crap because it doesn’t answer the most obvious question someone would have after reading this article.  It’s lazy and senseless.

The most obvious question, of course, would be to ask how much total debt does the US government have?

The US is currently $18.1 trillion in debt (and some change).

I hear it all the time, and, readers here, may also hear it frequently.  If China and/or Japan suddenly demanded all their money we owe them ……  (then they would own the US or something equally disastrous).  It’s a sad statement, but, a held belief, here in the US.  Personally, I don’t mind the sentiment.  I don’t believe the US should ever sell their bonds to a government entity.  But, the notion that we’re beholding to one government or another because of our debt they bought is simply not true.  At Suyts, we prefer to deal with reality, even if the unreal thought causes proper concern. 

A couple of interesting notes ….. China hasn’t moved much in the last few years in their holdings of US bonds.  Japan, has slightly increased in their holdings.  Past Suyts posts here for Oct 2013 and here for Mar 2014

China had $1.27 trillion in both posts, while Japan had $1.15 in the 2013 post and $1.2 trillion in the 2014 post. 

 

Now, pay attention to this snark!!!!  ………. My first thought was “great, Japan has bought $80 billion in US debt from their printed, make believe money!”  But, then, I thought, “that’s okay, because we printed make believe money in order to print the bonds!  So, we’re even!”

This so much calls to mind the bull $hit which happened in Iceland not too many years ago, but, on a much smaller scale.  As I recollect, it was put in this manner ……  A person has a mutt of a dog.  He prices it at $million.  Another person has a different mutt of a dog, which, he also prices at $million.  They trade dogs.  That generated $2 million of economic activity.  And, both now have dogs worth a $million a piece!   And, then, both would go borrow money on their new found valuable assets. 

What China, Japan, the US, and the Eurozone is doing is not real.  We’re trading worthless notes to finance our debts.

But, then, that brings me back up to Britain, and OPEC.  Britain’s purchases increasing their total US holdings by 8.4% is significant.  Why are they doing so?  I’ve no idea.  OPEC nations, I can somewhat understand.  Though, we could gain more understanding if the nations were specified.  I can’t imagine them all doing so on an equal basis. 

 

Lastly ….. audit the Fed!!!!!

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8 Responses to A Myth Laid To Waste!!! Interesting US Bond Purchases!!! What Does It Mean?

  1. Latitude says:

    ROTFL……I was wondering when you would get around to that!

  2. DirkH says:

    UK taking the fall for their master.

  3. Jason Calley says:

    A couple of years ago some Chinese economists estimated that as much as one third of the US GDP was essentially just imaginary wealth produced by swapping around pieces of paper (actually just computer entries.)

    Remember that anytime you see something expressed as a comparison to GDP.

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