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Foreign holders of U.S. Treasury securities

money.cnn.com

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Re: Foreign holders of U.S. Treasury securities

#31

Post by agilebyte »

tombrossman wrote: post #28
crdoconnor wrote: post #6

Earlier quoted context omitted.

New Caledonia isn't a tax haven. The Channel Islands and the Isle of Man are, and most likely contain quite a large proportion of the UK's t-bill holdings.

The Channel Islands are not a 'tax haven'[1], though we sometimes get called this by foreign politicians[2]. It is easy to take a cheap shot at a few islands outside your voting district. A much easier idea for a politician to sell, than a plan to balance the budget at home. [1] http://www.jerseyfinance.je/ceo-blog/it-s-official---jersey-... [2] http://www.bbc.co.uk/news/world-europe-jersey-23902431

If an island has 0%/10% corporate tax it is considered an offshore tax haven in the minds of the people that pay 15%+, just like sometimes Ireland or Cyprus is considered that way even though their tax is not 0%.

Re: Foreign holders of U.S. Treasury securities

#32

Post by grey-area »

venomsnake wrote: post #30
grey-area wrote: post #27

Earlier quoted context omitted.

In any case, the US cannot default on its debt because it is denominated in US dollars and we can always print more dollars. There's a name for that solution - it's called a soft default, and it's not a new idea. Clearly there is a limit to this, or politicians wouldn't bother with a budget or taxes at all - they'd just print money as required. It dilutes the value of existing currency and is a dangerous game which i…

Inflation doesn't punish the poor. It punishes the savers. Balanced budget/deficit/surplus are tools and not goals. When the business don't/can't spend it is the government job to pick up the slack (deficit). And when business is investing it makes sense for the government to not compete for the same capital and labor with the private sector (balanced/surplus).

There are different kinds of inflation of course, and if you have high wage inflation then the poor won't really be punished more than others, but asset inflation and the early stages of inflation (as we have seen in this particular crisis) do punish the poor, who in general don't have:

savings in assets other than cash

the flexibility to switch between asset classes to avoid inflation

large assets

large debts secured on assets

On top of that, too much inflation (asset or wage) does hurt everyone just as deflation does, so it is a balancing act, and simply printing more money whenever it is required is not a balanced policy. I don't agree with the current shutdown or manufactured crisis, but that's not an excuse to present money-printing as the magic solution to all government funding problems.

Balanced budget/deficit/surplus are tools and not goals

I disagree with that. It's fine to act in a counter-cyclical way as you have laid out above, and naively aiming for a balanced budget at all times would of course be damaging, but I do think a balanced budget and low inflation should be the explicit long-term goal of governments - otherwise the temptation is always to inflate their way out of difficulty, to start endless wars and never to pay down debts. If a crisis is required to borrow more, they'll invent one to do so.

Re: Foreign holders of U.S. Treasury securities

#33

Post by Fuxy »

miles wrote: post #12
aaronbrethorst wrote: post #7

Meanwhile, at the end of 2011, 54% of US T-bills were still held by domestic entities: http://www.gao.gov/special.pubs/longterm/debt/ownership.html edit: and it appears that China holds 22.6% of 46%, or (unless my math is horribly wrong) only about 10% of total US debt. Which, in the grand scheme of things, really isn't that much.

Exactly. Though the CNN chart looks super cereal[1], China only owns about 8% of the US debt as of 2011[2]. Of course, that's not to say we don't have an addiction to cheap credit in this country[3]. EDIT: The parent post was edited to add the China info, making this one largely moot. Leaving here for the links (sorry about the first one ;-) [1] http://www.youtube.com/watch?v=h05YfP_8UsU [2] http://en.wikipedia.org/w…

And while everybody is arguing about China nobody notices the small little island called Japan owning almost as much as China while allegedly having a very unhealthy economy.

Re: Foreign holders of U.S. Treasury securities

#34

Post by [deleted] »

Fuxy wrote: post #33
miles wrote: post #12

Earlier quoted context omitted.

Exactly. Though the CNN chart looks super cereal[1], China only owns about 8% of the US debt as of 2011[2]. Of course, that's not to say we don't have an addiction to cheap credit in this country[3]. EDIT: The parent post was edited to add the China info, making this one largely moot. Leaving here for the links (sorry about the first one ;-) [1] http://www.youtube.com/watch?v=h05YfP_8UsU [2] http://en.wikipedia.org/w…

And while everybody is arguing about China nobody notices the small little island called Japan owning almost as much as China while allegedly having a very unhealthy economy.

[deleted]

Re: Foreign holders of U.S. Treasury securities

#35

Post by nordsieck »

mmanfrin wrote: post #20
frank_boyd wrote: post #16

I don't understand why China (and Japan) did get into this so lightheartedly. I mean, the devaluation strategy applied by the US has been obvious for so long now. I'm actually surprised to not see some kind of "bank run".

Where's a better place for they to put their money/all those dollars coming in from exporting to the US?

The real reason is that China has, for a long time (not any more... sort of), had a policy of pegging the Yuan to the Dollar. In order to do this, they needed to buy a lot of Treasuries.

Re: Foreign holders of U.S. Treasury securities

#36

Post by seanmcdirmid »

nordsieck wrote: post #35
mmanfrin wrote: post #20

Earlier quoted context omitted.

Where's a better place for they to put their money/all those dollars coming in from exporting to the US?

The real reason is that China has, for a long time (not any more... sort of), had a policy of pegging the Yuan to the Dollar. In order to do this, they needed to buy a lot of Treasuries.

Right. If China didn't buy treasuries, they would have no choice but to strengthen their currency, and since their development plans are export-oriented, this would be really bad. Japan does the same thing less effectively, by the way, even if the Yen is fully convertible.

The gov has tried to get away from a pure dollar peg, they've even played around with Euros, but today I think they are strictly back on a dollar peg.

Re: Foreign holders of U.S. Treasury securities

#37

Post by eru »

dirktheman wrote: post #11
vacri wrote: post #5

"United Kingdom includes Channel Islands and Isle of Man" Well, I'm glad they specified that! Though I am left wondering if the total for France includes New Caledonia... and of course, it's something of a travesty that they didn't indicate whether or not the total for Russia includes the Kaliningrad oblast.

Yes, strange and inconsistent indeed. They also didn't specify wether 'The Netherlands' included the Dutch Caribbean or not. On a side note, I think that 80% of the Dutch don't know the difference between 'England' and 'UK'. I hear 'Im flying to Edinburgh tomorrow. England rocks!' all the time.

Try saying that once you step off the plane in Edinburgh.

Re: Foreign holders of U.S. Treasury securities

#38

Post by jbert »

tombrossman wrote: post #28
crdoconnor wrote: post #6

Earlier quoted context omitted.

New Caledonia isn't a tax haven. The Channel Islands and the Isle of Man are, and most likely contain quite a large proportion of the UK's t-bill holdings.

The Channel Islands are not a 'tax haven'[1], though we sometimes get called this by foreign politicians[2]. It is easy to take a cheap shot at a few islands outside your voting district. A much easier idea for a politician to sell, than a plan to balance the budget at home. [1] http://www.jerseyfinance.je/ceo-blog/it-s-official---jersey-... [2] http://www.bbc.co.uk/news/world-europe-jersey-23902431

I'm not sure what the definition of a tax haven is, but here's a page from the jersey govt. I don't study this, but it seems like it is a light/very light tax regime?

http://www.gov.je/LifeEvents/MovingToJersey/HighValueResiden...

"companies are generally taxed at 0% and there is a special 10% rate applying to certain regulated financial businesses."

"There are no 'wealth' taxes such as capital gains tax or inheritance tax."

"the first £625,000 of world wide income (including Jersey based) will be taxed at 20% thereby accruing the £125,000 per annum minimum tax contribution all personal income over £625,000 will be taxed at 1%"

Re: Foreign holders of U.S. Treasury securities

#39

Post by oleganza »

When government pays the debt with paper issued as a result of issuing more debt, it's like AAPL paying dividends per share in newly issued shares. In other words, it's de-facto default. De-jure it's not because in this case there is no court over U.S. government to proclaim its default.

Re: Foreign holders of U.S. Treasury securities

#40

Post by marcamillion »

nordsieck wrote: post #35
mmanfrin wrote: post #20

Earlier quoted context omitted.

Where's a better place for they to put their money/all those dollars coming in from exporting to the US?

The real reason is that China has, for a long time (not any more... sort of), had a policy of pegging the Yuan to the Dollar. In order to do this, they needed to buy a lot of Treasuries.

Even if they didn't peg to the dollar....where else are they going to put all that cash? They already own as much of the other commodities as they can get their hands on.

Ultimately, they want to protect the surpluses they have accumulated. What better way to do that than put it in the safest security in the world - well to date anyway.

Sucks to be them though....they have no choice but to keep buying Treasuries.

This is the point that many people miss. Yes...America is indebted to China...but it's really China that is more at the mercy of America.

If they leave their cash in cash, inflation will kill them over the long term. They can't realistically own 100% of all the commodities...and if they did that would be self-defeating because the price would plummet over time because people would find something else to replace the scarce commodities so their holdings would become worthless.

So their prudent management of their economy has given them a cash pile that no one else can rival, and has put them at the mercy of the largest debtor nation on the planet.

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