Thread: China wary of U.S. Treasury bills

Foreigners cut Treasury stakes; rates could rise



http://hosted.ap.org/dynamic/stories...02-16-17-12-54

WASHINGTON (AP) -- A record drop in foreign holdings of U.S. Treasury bills in December sent a reminder that the government might have to pay higher interest rates on its debt to continue to attract investors.



China reduced its stake and lost the position it's held for more than a year as the largest foreign holder of Treasury debt. Japan retook the top spot as it boosted its Treasury holdings.



The Treasury Department said foreign holdings of U.S. Treasury bills fell by a record $53 billion in December. That topped the previous record drop of $44.5 billion in April 2009.



Private analysts, though, were split over the significance of the decline. Some doubted that the drop in foreign holdings of short-term Treasuries signified growing unease about holding U.S. debt. They noted that net purchases of longer-term Treasury debt rose in December by $70 billion.



But other economists saw the decline as a warning signal. They fear that foreigners, especially the Chinese, have begun to worry about record-high U.S. budget deficits and are looking to diversify their holdings.



A sustained drop in foreign demand for dollar-denominated assets could lead to higher U.S. interest rates and falling stock prices. Those trends could threaten the U.S. recovery. But economists said they see no such evidence yet.



The Treasury report showed that China reduced its holdings of Treasury securities by $34.2 billion in December.



Alan Meltzer, an economics professor at Carnegie Mellon University, said China's shift should be a wake-up call for Washington.



"The Chinese are worried that we have unsustainable debt levels, and we do not have a policy for dealing with it," Meltzer said.



He said the Chinese worry that confidence in the U.S. government's ability to repay its debt could erode. That would cause the value of Treasurys and the dollar to fall - and lead to losses on Beijing's' U.S. debt holdings.

"The Chinese are worried that we have unsustainable debt levels, and we do not have a policy for dealing with it,"



Is it so hard to understand that when your creditors don't want to hold any more of your debt there might just be

a problem with what your doing?



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As an interesting side note something over a month later the Dalai Lama is now welcome at the White House...



http://www.washingtontimes.com/news/...-ire-in-beiji/

President Obama will welcome the Dalai Lama to the White House this month for a meeting sure to ratchet up tensions between China and the U.S.

They realized we are monetizing our debt by the trillions with no sensible tax policy for dealing with it,

and no intention to stop spending debt, making the T-bills they buy decline in value over time due to

inflation caused by printing so much money.

Closer to third world living standards...many very poor..but lots of super rich around to make the poor even more miserable. Very high crime rates, domestic abuse, etc.