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Debt

Discussion in 'Economics and Financials' started by my 2 cents, Jul 16, 2010.

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  1. my 2 cents

    my 2 cents Well-Known Member

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    The Chinese and Japanese divesting...China 7 out of the last 9 months lowering of overall US treasury holdings ... Japan joining the party the last 3 out of 5 months for a total debt divestiture of almost 6%in 1 dog gone month..WOW!!!!!

    ..........and the Brits increasing their holdings 9 FN % and we increased our holdings in Euro debt while we print more money, giving a nice illusion of confidence and the Brits actually investing in Treasuries unilaterally...............investing in Euro debt and printing more money,,,,wow how comforting........and we wonder why unemployment is steady.....

    http://finance.yahoo.com/news/China...3.html?x=0&sec=topStories&pos=3&asset=&ccode=

    IMHO, any short term deflation will be eaten alive by the inevitable massive and long term inflation (if our currency survives) if this scenario continues......because at this rate of divestiture from real investment and not the printing of more money to give to the Bits to create the illusion that they are "buying" Treasuries.........our currency will fail. Debate that if you will but I see no other alternative at that rate of divestiture.........

    This is huge and for the life of me I cannot get why there is no major coverage of this...............................
     
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  2. unluckyluciano

    unluckyluciano For My Hero JetsSuck

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    Before that they were one of the largest debt holders fyi.

    http://www.industryweek.com/articles/chinas_u-s-_govt_debt_holdings_hit_2010_high_22042.aspx
     
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  3. my 2 cents

    my 2 cents Well-Known Member

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    Makes perfect sense ....they raised their 2010 holdings to highest level this year (which is still down significantly overall when compared as a of GDP or total debt) when the Euro/Greek crisis was very much up in the air and bond yields actually registered on the radar and the offering was large........

    It is like I used to own $20 of T-Bills in the country of Spendmoneyistan and now I own $10 in the country of Spendmoneyistan and they owe $100 total...then I buy some Spendmoneyistan T-Bills and now I own $12, however they spent so much money that they now owe a total $300 .. so my debt holding went up but my exposure as a % of their debt is lower. Spendmoineyistan's debt overall is growing at a faster rate than either their GDP as an equal percentage and faster than than my investment in them.

    The article you provided fits with the scenario of an obvious large...very large amount of maturing Treasuries to balance the divestiture which I posted and they chose not to renew in Treasuries ..................as a guess because of yields and risk-reward and our ballooning debt..

    The Chinese % of total debt is down even more dramatically and if you look at the their holdings as a % of our GDP.

    Thanks for the link, 6% divestiture makes a little more sense and is not as "panicky" ,,,,still damn scary but I think I will forgoe the peanut butter for a steak at least a while longer.........

    Their is nothing good about this entire scenario...thanks much for the link.
     
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  4. unluckyluciano

    unluckyluciano For My Hero JetsSuck

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    no problem. It is a bit odd they would pull out given the state of europe. But your article states as a whole investments went up. So its not good, I don't think its a complete panic situation either.
     
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  5. my 2 cents

    my 2 cents Well-Known Member

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    Yeah I saw 6% divestiture and I think you would agree we should ALL panic if there were not more to it than that...........so I appreciate your link keeping me sane........................

    My fear is that we upped our investment with Great Britain the last few months and to me it looks like a shell game where we "print money" devaluing our currency, send it to the UK in the form of investment and they reinvest in US bonds to offset the Asian divesting making it appear as if our economic structure is still palatable to the rest of the world.....they (UK) invest 9%, Asian withdraws 6%, we "print money" send it to the UK and they send it back all laundered and we just further backed our own debt by "printing money"...deferring the currency effect....i cannot state that for fact but it sure looks like what is happening on the surface...and that in itself makes it more scary.............

    we always seem to get raw numbers skewed the way whomever wants us to see them....but we never get the big picture..like what exactly is the investment balance or imbalance the last few months between the US and UK? That would go a long way toward letting us in on the REAL effect of Asian divestment.......I am not sure of the exact figures myself...you have to dig so dang hard and put them together.......................
     
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  6. TokyoFishFan

    TokyoFishFan New Member

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    So how do exchange rates affect the debt issue?

    I know how it affected my rent when I used to live off-base here...
     
  7. my 2 cents

    my 2 cents Well-Known Member

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    Not much from that perspective...actually debt effects the exchange rate more than the exchange rate effects debt......debt will effect investment which in turn will effect currency values but the debt instrument is being bought in the currency of the investment country. Currency depreciation is different from devaluation..

    The value of one currency to another is constantly in play and debt will effect that rate.

    Foreign debt is constantly coming due and new Treasuries being offered. The balance of what matures and how much is invested in a time period is the number most refer to as debt balance.

    These are longer term offers and if there is devaluation of currency then your investment is worth less than what it was when you initiated the Treasury purchase although you are paid the yield on that Treasury....for instance if you purchased a $100 bond at 10 and when it came due the currency had devalued 20% then you still get your $100 plus $10 yield....but the $100 may now only be worth $80....

    So if you then buy $80 worth of Treasuries you are hoping the value of the currency will then go up and you can recoup some of your "lost" value..........the bigger problem with what is happening now is that the Chinese and Japanese are saying, thanks but no thanks, and taking their money and not reinvesting at the same rate....so "we" cannot finance our debt with foreign investment...which is my fear that we invested in UK treasuries and in turn were "repaid" b y their investment in our Treasuries.. the net result us reading in the press foreign investment is up, when in reality we printed more money to create the illusion that the worlkd does not see our debt as a big issue...obviously the Asian world does.........

    When you print money with no productive mechanism to back it up (GDP/trade balance) ...and we have printed MASSIVE amounts of money, which leads to currency devaluation ......and inflation!

    Complicated and probably why economists have jobs...............
     

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