Rats Leaving the Sinking Ship?

[admin]

Wow, look at that swing in net foreign purchases of U.S. Treasuries in September; went from $44B in August to 0 in September: 

http://www.treas.gov/tic/tressect.txt

The Japanese were net sellers, as were, I presume, hedge funds (Carib. banking centers):

http://www.treas.gov/tic/mfh.txt

If this stuff keeps up, the Treasury will have to raise interest rates it pays to keep folks interested in funding the federal deficit.

And, that's what happened, if you look at the short-term (up to one year) Treasury yields in October.

[(former)FormerSanDiegan]

Last time net foreignn purchases swung negative after a prolonged positive period was in late 1998. It took another 18 months or so before it was peristently negative in spring 2000. Does this tell us what to expect now ?

[The-Shoveler]

Nor_LA-Temcu-SD-Guy

If the above is True, make you wonder who’s been buying them.

Someone seems to be buying them ???

Any Idea’s ???

[Anonymous]

Arabs. Follow the oil. Think about it.

[powayseller]

MarketWatch reported, “Net long-term capital inflows fell to $65.1 billion in September from a revised $114.4 billion in August. August’s inflows had previously been reported as $116.8 billion, which was a record.

The net long-term capital inflows weren’t enough to cover the U.S. current account deficit, which has been running at about $70 billion a month.”

How will the US make up the shortfall? Is this a noisy data point, or a harbinger of things to come? Foreign central banks have been warning of their intent to diversify. Is this the beginning?

guy1 is probably right. lower oil sales means fewer petrodollars to recycle. As oil falls, our Treasury sales drop. Add to that reduced demand by China.

So how do we fund our budget without these purchases?

[bubba99]

The FED buys the debt with newly created dollars. This is inflationary, but because they stopped reporting M3, we really don’t know how much of this goes on. When the FED buys debt with new dollars, almost everyone is happy. The debt is paid, the fed get the interest, the only losers are holders of old dollars.

The value of the dollar vs the euro has been dropping about 10% per year since 2002. Those who hold dollar debt at 5% are losing 10% on the exchange rate each year for a net loss of 5%. I wonder how long people will keep lending us money at a loss.

[powayseller]

M3 as reported by John Williams of Shadow Government Statistics is rising 9% year over year.

Thanks for the explanation, bubba99. I forgot that the government just prints money.

What I don’t understand is why the Fed doesn’t stop with all that money printing, since it is raising inflation at 10% annually, according to that same site. On one hand they raised interest rates to control inflation, but on the other hand they are printing money, which is having the opposite effect. It is like filling a bathtub by running the water and keeping the plug out; it cannot fill up. Likewise, how can inflation be tamed if they keep printing money?

Does the Federal Reserve think we are too stupid to figure out their statistics are tortured to suit the government purpose of keeping cost-of-living adjustments low? I guess they do. With all their hedonic adjustments, they have fooled the masses into thinking inflation is only 2 or 2.5%. For the average person, who’d rather watch Desperate Housewives than read an economics text, the deception is working. But why are the professional investors and economists fooled by the government statistics?

Do you think John Williams is accurate on these statistics than the BLS?

[PerryChase]

That’s why we need outsourcing and China to keep on selling us cheap stuff to keep inflation at bay. Chinese products are getting more expensive, so we’re signing a trade deal with Vietnam.

It’s a great deal so long as we can keep on giving them paper dollars for them to give us goods and services to consume. We don’t need to work very hard or build factories that dirties-up our environment.

The question is how long can that last?

[Author]

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