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Foreign Demand For Treasury Notes Falls

From a seemingly surprised Associated Press (though, unexpectedly, they never use the word unexpected):

Foreign demand for Teasury [sic] securities falls

By MARTIN CRUTSINGER (AP)

February 16, 2010

WASHINGTON — The government said Tuesday that foreign demand for U.S. Treasury securities fell by the largest amount on record in December with China reducing its holdings by $34.2 billion.

The reductions in holdings, if they continue, could force the government to make higher interest payments at a time that it is running record federal deficits.

The Treasury Department reported that foreign holdings of U.S. Treasury securities fell by $53 billion in December, surpassing the previous record of a $44.5 billion drop in April 2009.

The big drop in China’s holdings meant that it lost the top spot in terms of foreign ownership of U.S. Treasuries, dropping to second place behind Japan.

Japan also reduced its holdings of U.S. Treasuries, cutting them by $11.5 billion to $768.8 billion in December, but that amount was still more than China’s December total of $755.4 billion.

The $53 billion decline in holdings of Treasury securities came primarily from a drop in official government holdings, which fell by $52.3 billion. The holdings of foreign private investors fell by $700 million during the month of December.

For all of 2009, foreign holdings of U.S. Treasuries dipped by $500 million. In 2008, foreigners had increased their holdings of U.S. Treasuries by $456 billion as a global financial crisis triggered a flight to the safety of U.S. government debt.

That flight to safety had driven down the interest rates that the government was having to pay on its debt to record lows with rates on some short-term securities dipping into negative territory for brief periods

Overall, the Treasury Department said that foreign net purchases of long-term securities totalted [sic] $63.3 billion in December, down from $126.4 billion in November…

As we have noted previously, Mr. Obama’s entire ‘blueprint for recovery’ was based upon the supposition that he could run up the deficit as much as he wanted, since everybody would always want Treasury notes.

To quote from the so-called blueprint, ‘How to End the Recession,’ which was written in November 2008 by Mr. Obama’s financial guru, Robert Palin:

As long as the private financial markets remain gripped by instability and fear, the Treasury will be able to borrow at negligible interest rates. Because of this, allowing the deficit to rise even as high as 7 percent of GDP does not represent a burden on the Treasury greater than what accompanied the Reagan deficits.

Well, that is turning out to be yet another Obama fantasy.

Of course, to be fair, the fact that we have now reached a deficit that is 9.9 percent of the GDP doesn’t help, either.

This article was posted by Steve on Tuesday, February 16th, 2010. Comments are currently closed.

6 Responses to “Foreign Demand For Treasury Notes Falls”

  1. Rusty Shackleford says:

    The reductions in holdings, if they continue, could force the government to make higher interest payments at a time that it is running record federal deficits.

    ….All according to plan.

  2. proreason says:

    I’m dreaming of out-of-control inflation.

    Just like the out-of-control inflation that Carter used to know.

    Where government power glistens and our enemies listen.

    To Obamy destoying all our dough

  3. Right of the People says:

    Obama lied, the economy died!

  4. GetBackJack says:

    There are only two answers …

    1. You have to be beyond stupid to kill the golden goose of the American dollar, or …

    2. This is exactly what you’re trying to do.

    There is no Third Answer

    (some of you will get the allusion)

  5. Chuckk says:

    You mean the government can’t borrow and spend indefinately and without consequences? Who knew?

  6. canary says:

    China is in a panic watching Obama recklessly bankrupt his own country. The truth about the global warming has not slowed Obama’s determination to make it priority, while he turns America’s defense into aiding a people who kill & mutilate each other in the name of religion, saying kind we love you words, while insulting China in front of the world. Blame it on Obama.


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