I’m loading a lot of data plus my thoughts based on it…I respect your thinking and glad to hear your thoughts…glad to know why I’m wrong and where I’ve gone wrong.
Take a gander at who’s bought all that new Treasury supply…not just the Fed, it’s foreigners who love our liberty and low yielding bonds…(based on TIC reports) and are supporting the DOLLAR.
“foreign” holdings of US Treasury’s….Fed holdings……total outstanding public debt
Dec ’00 – ………….$1 T ……………….$200B*…………………………..$3.3 T
Dec ’07 – …………$2.35 T ……………..$400B*…………………………$5.1 T
Oct ’13 – …………$5.65 T ……………..$2.3 T**…………………………$12 T
* mostly short end bills
** almost entirely long end bonds
Now look @ individual country increases, Jan ’07 to ’13???:
China $400 B —> $1.3 T (15% of GDP)
Japan $600 B —> $1.2 T (18% of GDP)
UK $100 B —> $158 B (5% of GDP)
Brazil $54 B —> $246 B (10% of GDP)
Taiwan $38 B —> $185 B (40% of GDP)
Russia $9 B —> $150 B (5% of GDP)
Ireland $19 B —> $111 B (55% of GDP)
Belgium $13 B —> $180 B (40% of GDP)
“carribean banking centers” $68 B —> $291 B
“oil exporters” $112 B —> $237 B
Luxembourg $60 B —> $133 B (220% of GDP)
Norway $20 B —> $78 B (15% of GDP)
France $10 B —> $60 B
Singapore $30 B —> $86 B (35% of GDP)
Switzerland $34 B —> $174 B (35% of GDP)
India $15 B —> $60 B (3% of GDP)
Thailand $16 B —> $45 B
Canada $28 B —> $58 B
Germany $50 B —> $60 B (2% of GDP)
Italy $14 B —> $29 B (1% of GDP)
Netherlands $15 B —> $30 B
Turkey $25 B —> $50 B
None appear to be leaving the treasury table…not sure if they are given money via swaps or promised “something” (gold???) to keep buying or if they are simply so weak they’ll do anything to prop up the system. But nothing data wise sez this is bout to come unhinged.
Point is all these nations and many more are actively supporting the dollar system (regardless their yapping) and seems in all their interest to maintain dollar and help keep a lid on rates, lid on PM’s, lid on commodities, and print ad nauseum. Not surprising gold is going nowhere when every country has it in their best interest to smack it down.
Probably also notable that the PIIGS have been so busy running their own LTRO that they are full to the gills of their own nations debt and do not appear on the list (except the curious exception of Ireland??? wonder where they got all those $’s while also going through their own bailouts???)…
BTW – trend of total Foreign ownership of Treasury debt since ’08…
Jan ’08 $2.4 T
’09 $3 T
’10 $3.7 T
’11 $4.4 T
’12 $5.1 T
’13 $5.6 T
Oct ’13 $5.65 T
seems main reason for slowdown in ’13 was debt ceiling freeze (only issued $650 B in ’13) while QE was buying up $540 B…but since debt ceiling raised, Treasury has issued over $600 B since Oct 17 to catch up. Don’t really see any trend changes or anybody selling off.
here’s the source data…
Then again, I freely admit the Treasury TIC data could be completely fraudulent as all the Treasury’s are held in US financial institutions and “assigned” to the foreign entities – could be they are bought via the Fed or ESF or straight up digital counterfeiting / accounting fraud. I have heard of one or two other .gov reports not exactly adding up…would make as much sense as “foreigners” buying all this ridiculous paper.
PART 2 -
this data is freely available and very much contradicts many peoples paradigms that the Fed alone is buying everything….or that China is dumping everything paradigm. Now, what to make of the data is very interesting debate but I just wanted folks to at least start w/ the same data and focus the discussion on what is vs. what isn’t happening.
The Fed’s balance sheet is definitely going straight up (particularly when considering of the Fed’s $400 B in holdings in ’08 were primarily short duration Bills vs. now holding almost entirely long duration Bonds; ie, Fed could have wound down the majority of it’s positions in ’08 w/in 6 months or a year by simply not rolling them…now, the Fed likely has an average maturity of 7 to 10 years and in such quantity that they will never be able to roll-off Fed’s books…will be forced to roll these $2+ T and still growing in treasuries forever).
Now, I’m not sure I’d agree the data shows confidence in the dollar…I might suggest the opposite. The Fed and Foreigners buying massive quantities of Treasuries while domestically there has been no relative increase in Treasury holdings since ’00 (total held notes/bonds domestically has been $2.5 T +/- 250 B since ’00)…this is a flashing red light on the dashboard for me. Particularly as the Fed now states it will taper it’s purchases which would effectively leave the $5.65 T in foreign holdings subject to rising yields and falling prices…or otherwise a scenario where they would take significant losses (likewise the Fed on it’s MBS portion). Most folks would begin liquidating positions when clear losses are inevitable but through Oct ’13, Foreigners have done no such thing!?!
So, either the Fed is going to allow and enable rates to break the 34 yr trend of decreasing rates (the same 34 yr period in which the greatest debt load in history was built…under the guise that ever greater debt will always be serviced by ever lower interest rates upon ever higher debt) and simultaneously chase out foreigners from the bond market…and leave the only source of Treasury buyers from domestic sources who will be forced to sell the majority of their risk assets (Dow 1,000?) to buy up all the rapidly rising yields on Treasury debt…or Fed is running a very large head fake before a much larger QE…and “foreign” holders somehow know this!?!
Only two options I see to attract domestic sources of cash to buy the $2 T necessary in ’14 if Fed doesn’t would be…($1 T in new issuance…Treasury has already issued over $600 B since Oct 15 budget yr start paying back all the internally “borrowed” cash from last years debt ceiling freeze + sequester rollbacks) + at least $1 T in foreigner sell / roll off assuming falling bond prices…)
1- rates rise significantly to make Treasury’s more attractive than high performing risk assets…and in so doing crash the interest rate sensitive economy…
2- stock market and economy crash 1st making very low yields relatively far more attractive than everything else.
Somehow I don’t see either of those scenarios in the Fed’s planning?
Seems given these above seemingly silly scenarios, given record fractionalization of PM’s, given metals driven to selling at a discount to their cost of production…that this 2014 timeframe is the turning point, the pendulum swing point and the pendulum may swing quite unevenly the opposite direction shortly w/ an even larger QE or some game changing event in the currency market?!? Hard to see a scenario where currency’s aren’t reset against PM’s to re-plumb a system backed up on far too much toxic sh-tuff…
The Treasury has created massive supply, via the Fed, for which there will never be organic demand absent a mega departure from risk into bond “safety”…
The fact that “foreign” holdings of US Treasury bonds are a record $5.65 T of the $12 T public outstanding debt (vs. $2 T Fed holdings) and foreigners are not selling off their holdings tells you they have been reassured QE is forever…otherwise they would soon be facing large losses as yields rose and bond prices collapsed…in other words, on a QE taper of it’s buying, foreigners would front run the exit.
Hard to believe people (everybody) don’t understand the Fed now *must* print forever moar…no debate, no QE tapers or QE wind downs…no exit from hyper-monetization. End. Stop. Period.
Gold, silver, commodity prices falling in this situation are ludicrous…as ludicrous as if I told you there would be fewer and fewer dollars chasing ever growing # of assets and this would cause the price to rise…we have an inverse where ever more infinite dollars are chasing fixed and growing scarcer resources causing the price to…fall.
That this would be accepted and peddled by economists, professors, etc. to the people show it’s clearly time for me to check into the Loony bin. How deep into the propaganda state are we to observe something and accept it is exactly the opposite as our observation.
Trend of Foreigner holdings of US Treasury debt since ’08…go check the source data and notice foreigners are maintaining (not adding/not selling) just about record high Treasury holdings…
Jan ’08 $2.4 T foreign held US Treasury debt – new debt issued $1 T – (Fed held $400 B…purchased $0)
’09 $3 T FH’s- $1 T New Debt – Fed bought $400 B QE1…$600 B Foreigners buying ($0 left over after Fed/Foreigners)
’10 $3.7 T FH’s – $1.9 T ND – Fed $0 treasuries… $700 B in foreign buying ($1.2 T left over)
’11 $4.4 T FH’s – $1.7 T ND – Fed bought $0 Treasuries in QE2…$700 B in foreign buying ($1 T left over)
’12 $5.1 T FH’s – $1.3 T ND – $0…. Fed bought $800 B… $600 B in foreign buying ($-100 left over)
’13 $5.6 T FH’s – $1.35 T ND – Fed bought $0… $500 B in foreign buying ($835 B left over)
Oct ’13 $5.65 T FH’s – $700 B ND – Fed bought $540 B in QE3…$50 B in foreign buying ($100 B left over)
seems main reason for foreign holdings slowdown in ’13 was Treasury issued $680 B while QE was buying up $540 B…Correction on ’14, first qtr of ’14 (oct-dec) budget is about $180 B deficit on target for about $750 B or likely closer to $800 B annual after sequester non-cuts…Fed purchased $135 B ($45 B left over…)
here’s the source data…
I’d gladly be wrong but we have to do our best to have a common understanding of where we are…and for now based on TIC there don’t seem to be negative consequences or selling of US Treasury debt.
…$325 B was added to the debt on Oct 17 but Treasury is somehow not claiming this debt as part of ’13 $680 B deficit or ’14 1st qtr budget deficit of $180 B.
Interesting Federal deficit has increased by $535 B this budget year (since Oct 1) which means we are well on the way to a $1 T deficit (actual Treasury issuance) but Treasury is claiming deficits to be shrinking…shrinking deficits meme simply propaganda.
wow, what an effort. Some good stuff there. Just a couple of thoughts. 1) on TIC – treasury lists by country of origin, not necessarily country where owners reside. As an example, China’s SAFE has a London office. Which if it bought treasuries (for china) would be credited to UK. 2) some of the sell off of treasuries this past summer by foreign countries could have been in response to “hot money” leaving (and coming back to US) on taper fears. Might have had to sell usd denominated assets to prop up own currency. anyway, just a guess.
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