Foreigners Reduce Holdings of US Debt by Record Amount
EmailABC's Matthew Jaffe reports from Washington: Foreign owners of US government debt reduced their holdings by the largest monthly amount ever in December, with China offloading so many Treasury securities that it is no longer the largest foreign holder. According to new data released Tuesday morning by the Treasury Department, foreign holdings of Treasury securities plunged by $53 billion in December, a record drop. China led the sell-off, reducing its holdings by $34 billion. Japan, meanwhile, increased its holdings by $11 billion to become the new largest foreign holder of Treasuries. As of the end of December, Japan held $768 billion of US government debt, followed by China at $755 billion, and then Great Britain at $302 billion, after increasing its holdings by $25 billion during the course of the month. In the last year there have been consistent concerns that China and other nations might reduce their holdings of US government debt as the US continues to rack up record deficits in the wake of the recession. If foreigners were to undertake a massive unloading of US Treasuries, the country could have to make higher interest payments. Earlier this month, Moody’s Investors Service cautioned that the US could be in danger of losing the triple-A rating for its Treasury bonds unless the nation’s deficit gets brought under control or the economy grows more than expected. However on February 7 Treasury Secretary Tim Geithner told ABC’s Jake Tapper on “This Week” that “that will never happen to this country.” “When people were most worried about the stability of the world, they still found safety in the Treasuries and the dollar,” Geithner said. “That is a very, very important sign of basic confidence in our capacity as a country to work together to fix these problems.”
RSS
Twitter
Facebook
Good. If the foreign credit dries up, we will be forced to live within our means.
Posted by: Rick McDaniel | February 16, 2010, 12:47 pm 12:47 pm
Rick McDaniel -You are right. This is what Ron Paul was warning about. The reserve currency status for the dollar will also come under great threat in the near future.
Posted by: Huh | February 16, 2010, 1:03 pm 1:03 pm
$53 billion doesn’t sound too much like a plunge in comparison to the total debt China holds. It sounds more like a readjustment in their investment holdings. Granted it’s more money than I will ever see in 100 lifetimes, but when all is said and done, it’s just a game on paper.
Posted by: KsDevil | February 16, 2010, 1:44 pm 1:44 pm
Everybody wants a balanced budget.
However, when a handout is offered to us from the treasury department, we all think that it’s a good idea.
Gov. Jindal is taking the heat now in Louisiana because he wants to cut the budget by l8% so that we can live within our means.
People are acting as if they don’t know what that means. Go figure.
Happy Mardi Gras, y’all!
Tomorrow is Ash Wednesday (start of Lent). Now we must offer sacrifices.)
Moral of story:
You can have fun, but you have to pay for it in the end.
Posted by: ddg | February 16, 2010, 2:17 pm 2:17 pm
This is exactly what I predicted last year.
Posted by: DelegateMath | February 16, 2010, 2:36 pm 2:36 pm
Who really wants to live within their means? Not anyone I know. From what I’ve read, too many Americans have maxed out their credit cards, taken second mortgages, etc. just to have that third car, the five Harleys, the boat or some other piece of conspicuous consumption. When Obama offers a new budget, let’s see how many Republicans and/or Democrats are willing to truly cut funds, including defense, in order for us to “live within our means.”
Don’t hold your breath waiting for that to happen.
Posted by: Sisko24 | February 16, 2010, 3:36 pm 3:36 pm
Whether the politicians want to cut the budget or not is a mute point. They will be forced to or suffer dire consequences in the not too distant future. Then all citizens mortgaged to the hilt will lose everything. And then a true depression will begin. Glad my mortgage is almost paid off and that I have no other loans.
Posted by: Sandi | February 16, 2010, 4:20 pm 4:20 pm
Obviously, if you keep printing dollars like toilet paper.
Posted by: freedom | February 16, 2010, 5:38 pm 5:38 pm
Woot woot, the fall of the dollar and inflation through the roof is almost here. Thank you Lord Obama and your willing sycophants in the house and senate, no country could have destroyed us, it took you idiots and a moronic voting public with the educational equivalent of borneo bushman to elect these drones into office. Relish the coming pain and thank you Lamestream press for carrying Obama’s water all the way to the white house. It’s really too late to pretend you care to report facts……the die is cast.
Posted by: Red Ruffansore | February 16, 2010, 5:58 pm 5:58 pm
Sounds to me like Toyota is going to ask to be treated just like General Motors . Japan Doubles Down their bet . We live in interesting times .
Posted by: Bubba | February 16, 2010, 6:34 pm 6:34 pm
Quote:
Foreign owners of US government debt reduced their holdings by the largest monthly amount ever in December, with China offloading so many Treasury securities that it is no longer the largest foreign holder.
Question:
when they “reduce” or “offload”, where do those securities go? The treasury isn’t buying them back is it?
Thanks.
Posted by: gtaylor | February 16, 2010, 6:40 pm 6:40 pm
It’s because bankers own the governments of the countries and they crush everyone under perpetual debt as Jefferson warned against.
Posted by: Phil E. Drifter | February 16, 2010, 6:50 pm 6:50 pm
Go on plundering the world to stay afloat.This is the true American spirit.
Posted by: cbee | February 16, 2010, 7:21 pm 7:21 pm
And even now most in Washington do not want to correct the biggest contributer to the deficit right now i.e. the wars, healthcare spending and Bush’s tax cuts on the wealthy. So now we get to watch the bank CEO’s pay themselves big bonuses with American tax dollars and health insurers up everyone’s premiums through the roof while the holders of our debt lose their confidence in the U.S. government. Oh, and let’s not forget watching the tea-bagging libertarians blame it all on the one year in office black president.
Posted by: DesertWren | February 16, 2010, 7:52 pm 7:52 pm
“that will never happen to this country.” Okay Mr Geithner… and the Titanic was “unsinkable”.
Posted by: liberaljihad2 | February 16, 2010, 8:04 pm 8:04 pm
This is a vote of confidence in the the current direction of the United States.
Posted by: tillyerkt | February 16, 2010, 8:43 pm 8:43 pm
DesertWren-You are spewing nonsense. Libertarians place blame on the corporate fascist system of governance which has been growing for 35 years since gold was delinked. Please get a grip on your slander.
Posted by: Huh | February 16, 2010, 9:29 pm 9:29 pm
Bubba, I think the bonds mature, and can be cashed out. The cash can be invested back into more bonds. So it may just be that China had $53 billion of bonds mature and did not buy any new ones. US must find new buyers, which will only happen by offering better returns. It’s just like any business.
Posted by: Eric | February 16, 2010, 9:39 pm 9:39 pm
to Huh: The problem is, China may stop buying bonds all together, and as their $700 matures, we’re screw. Coincidentally, $700 billion is about how much oil the US imported in 2008. Solution, tax the crap out of energy, and we will use half as much, balancing the federal budget, and reducing the trade deficit.
Posted by: Eric | February 16, 2010, 9:41 pm 9:41 pm
Eric-I know, you are right. We are in big trouble.
Posted by: Huh | February 16, 2010, 9:50 pm 9:50 pm
Here we go boys and girls . . . into the abyss.
Posted by: dave | February 16, 2010, 9:53 pm 9:53 pm
Please! Foreigners reduce holdings by a small and insignificant amount, would be closer to the truth. 50 billion or so out of holdings worth trillions is an insignificant amount. If and when foreigners realize that the US dollar is worth less than toilet paper, then they’ll reduce a significant amount–like hundreds of billions. In the meantime, please, stop exaggerating!
Posted by: Dayahka | February 16, 2010, 9:57 pm 9:57 pm
There is a ticking economic time bomb which I’ve not seem mentioned anywhere. Until the “Great Recession,” the United States was the single largest consumers of world production. With the “Great Recession,” this consumer base has drastically shrunk. Doing so, demand for world production has drastically shrunk. As a result, global production is not going to recover to anything as large as it was. China, for example, can produce all it wants, but there are far fewer to acquire it, leaving China with an excess production capacity. Additionally, as long as the neo-mercantilist economic structure of globalization continues in place, wages will continue to be depressed throughout the world. Being so, no demand can occur to replace declined U.S. demand. Given present circumstances, there is no possibility of a global recovery.
Posted by: philandrel | February 16, 2010, 11:14 pm 11:14 pm
Here are some suggestions:-
1/ Stop expensive foreign wars in Iraq, Afghanistan and Pakistan;
2/ Stop subsidizing Israel to beat up Palestinians.
3/ Severely trim the list of mind altering substances that are illegal and for which draconian prison sentences are prescribed for poor black offenders;
4/ Abolish mandatory minimum sentences for drug crimes and drastically cut existing sentences;
5/ Raise taxes on the rich to what they were in Eisenhower’s time.
Posted by: Carlyle Moulton | February 16, 2010, 11:19 pm 11:19 pm
The reason we have debt is because taxes on the richest people were slashed by Bush and the Republican Congress. Raise taxes to where they were under Bush the Senior or better yet, to the levels under early Reagan, and our defecit and debt would melt away.
RAISE TAXES NOW! The rich made out like bandits over the past 10 years. Now they need to pay up. How about 50% tax on anyone making over a $1million. There’s plenty of historical precedent for that. You betcha!
Posted by: Lee | February 16, 2010, 11:33 pm 11:33 pm
Huh-You obviously have not read the posts at reason lately. The Libertarians there think corporations are just fine; it’s the government that is the problem.
Posted by: DesertWren | February 17, 2010, 12:28 am 12:28 am
What have we been telling you?
Posted by: nader paul kucinich gravel | February 17, 2010, 4:07 am 4:07 am
So the US is in danger of losing its triple-A credit rating? I wish Amerika had to play by the same rules its citizens do. My reward for a perfect payment history has been soaring interest rates and a rapidly-dropping credit score. They cut my credit limits until I’m maxed out without even making a purchase. Isn’t Amerika wonderful?
Posted by: Juan Valdez | February 17, 2010, 11:14 am 11:14 am
Politicians want to get re-elected, and that is why they do not want to point out how we can save money.
As I said before, Gov. Bobby Jindal of Louisiana is pointing out how Louisiana can cut their budget, but it’s not going over too well with some people.
We need more people like Jindal to sacrifice themselves in order to really help balance the budget.
Each state should demand and challenge their leaders to lead by example.
Posted by: ddg | February 17, 2010, 12:56 pm 12:56 pm