China is slowing down its purchases of US Treasuries. This could be trouble in the near future. The Economic Populist says:
“Increasingly China is becoming a less and less dominant creditor to America…Other foreign creditors have taken China’s place in buying our debt. In fact, foreign purchases of treasury debt has never been greater…While that should be good news, it isn’t for several reasons….The first reason why this isn’t good news is because of the sheer, overwhelming volume of treasury debt being issued. Despite a massive increase in foreign purchasing of treasury debt, the massive supply of new debt coming on line is swamping it.”
The second reason is that we are only talking about treasury debt. The entire rest of the world, especially the private sector, has stopped purchasing all other types of our debt.
Check out the whole article – it’s worth it. Here’s one last teaser:
This isn’t a matter of politics – it’s a matter of math. The money simply isn’t there. Foreigners, no matter how hard they try, can’t lend us dollars that they don’t have if they don’t have the trade surpluses to begin with. What’s more, why should they be lending us money when we’ve already proven that our financial system is full of crooks?
China had an $18 billion trade surplus last month.
If we assume just Obama’s 1.7 trillion deficit and pretend there isn’t anything else to make that a bigger number, we’ll need to sell about $140 billion dollars a month.
So … if China gives us all their money that just leaves $122 billion to get.
How many positive current account countries are there out there? How many don’t need it to spend on their own stimulus?
I’m thinking the printing press are going to be busy.
Don’t you just love the smell of money ink in the morning?