Simon Black at "Sovereign Man" put an article out yesterday that gives a quick overview of the U.S. debt situations and asks the question, "who will buy U.S. debt when Japan and the Fed stop buying"? It's hard to say exactly what Japan will do, but that really is not the point. The U.S. is quickly approaching a time when there will be a lack of buyers for our debt. No worries, right? The Fed has already primed the pump and taken steps to make it appear that there is nothing wrong with buying our own debt! Of course, that was a very smart strategy from a PR standpoint. Oh, and there are no signs of inflation anywhere, according to Mr. Bernanke, so no need to buy gold, silver, oil, agriculture, or any other commodities. Just ignore the 10 year bull market in gold, it means nothing???
POSSIBLY THE LAST TIME TO GET OUT OF THE DOLLAR
by SIMON BLACK
March 15, 2011
Dallas, Texas, USA
It’s no secret that the United States government owes a pretty penny to foreigners. Certainly, what America owes to foreigners pales in comparison to what it owes to Ben Bernanke… but still, $4.45 trillion is no small number, even in these crazy times when terms like “kajillion bajillion” are more appropriate to quantify debt and entitlements.
China is the largest foreign buyer of US Treasuries with around $1.15 trillion in holdings… Japan is the second largest at around $886 billion. Curiously, the trend for China has been down– the Middle Kingdom has been steadily reducing its position since peaking in October 2010.
Japan, on the other hand, has been steadily increasing its Treasury holdings over the same period. Its government does have a long pattern of currency intervention, and there has been much grumbling in Tokyo about the effects of the strong yen on their exports.
Fast forward to this past weekend. Earthquake. Tsunami. Volcano. Nuclear radiation. Japan clearly has other things on its mind right now than to continue financing the ongoing largess in Washington DC.
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