“Double the holdings? It is definitely impossible.”
December 19th, 2009Via: Shanghai Daily:
IT is getting harder for governments to buy United States Treasuries because the US’s shrinking current-account gap is reducing supply of dollars overseas, a Chinese central bank official said yesterday.
The comments by Zhu Min, deputy governor of the People’s Bank of China, referred to the overall situation globally, not specifically to China, the biggest foreign holder of US government bonds.
Chinese officials generally are very careful about commenting on the dollar and Treasuries, given that so much of its US$2.3 trillion reserves are tied to their value, and markets always watch any such comments closely for signs of any shift in how it manages its assets.
China’s State Administration of Foreign Exchange reaffirmed this month that the dollar stands secure as the anchor of the currency reserves it manages, even as the country seeks to diversify its investments.
In a discussion on the global role of the dollar, Zhu told an academic audience that it was inevitable that the dollar would continue to fall in value because Washington continued to issue more Treasuries to finance its deficit spending.
He then addressed where demand for that debt would come from.
“The United States cannot force foreign governments to increase their holdings of Treasuries,” Zhu said, according to an audio recording of his remarks. “Double the holdings? It is definitely impossible.”
“The US current account deficit is falling as residents’ savings increase, so its trade turnover is falling, which means the US is supplying fewer dollars to the rest of the world,” he added. “The world does not have so much money to buy more US Treasuries.”
China continues to see its foreign exchange reserves grow, albeit at a slower pace than in past years, due to a large trade surplus and inflows of foreign investment. They stood at US$2.3 trillion at the end of September.
i suspect this isone of the main reasons why John Williams at Shadowstats pulled the pin on the near-term hyperinflation. As the Chinese monetary big-wigs are pointing out, next year has “monetizing the debt at unprecedented levels” writ large for the US govt/Fed/banksters. there is literally nowhere legit for this money to come from to finance the hyper-deficit. now it just looks like a matter of guessing how “Banking System Meltdown II” will play out, and where the panic will be triggered first…imho, of course 😉
my 2c worth: CDS are very nasty.