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Old 04-22-2009, 05:51 AM   #1 (permalink)
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Whom do we owe?

Found this interesting article this morning...

Quote:
Whom Do We Owe?
Posted Tue Apr 21, 04:03 pm ET
Posted By: Dirk van Dijk, CFA

Recently, the monthly data on who the major holders of treasury debt are was released. Overall, $3.162 Trillion of Treasury debt was held overseas at the end of February 2009, up 37.5% from a year before ($2.226.1 Trillion).

The largest holder and the largest increase in absolute terms is China, which holds $744.2 billion -- a 52.4% increase from $486.9 billion in February of 2008. Japan is the next largest at $661.9 billion, but up only 13.5% from a year ago.

Next is a group that probably hides who the true holders are, the Caribbean Banking Centers. The collectively hold $189.1 billion of Treasury debt, and are up a stunning 82.0% from a year ago. They are followed by the Oil Exporters, at almost the same level, $181.7 billion, but who surprisingly had a much smaller increase, up just 24.0%.

Perhaps most striking about the list are some of the countries towards the bottom of the list. For example, Canada holds only $10.9 billion of our debt, down 51.1% from a year ago. This is less than one third the amount of our debt that Mexico owns ($37.9 billion). Thailand owns more ($39.7 billion) than twice the amount that is held by Israel, France, Italy, Sweden, the Netherlands and Belgium. Brazil holds more ($130.8 B) than those major European countries combined.

This data seems to be more evidence that the world's economic center of gravity is shifting from what we have long termed the "developed" counties (roughly speaking the OECD, but not exactly, since both Mexico and Turkey are members of the OECD) to what we used to think of as the "third world."

Clearly the developing world has taken a big economic hit with the current worldwide slowdown, but they may come out the other side of this in better shape than most people recognize. While many people point to China as America's new bankers, clearly they are not alone, and far-off exotic locals are becoming increasingly important to the government in financing our debt, not just the traditional non-US financial centers like London, Geneva and Frankfort.
Link Here

I knew we owed China and Japan a bunch of money but I had no idea we owed as many countries as we do.

Wonder if the US is ever going to start living within it's means? Wonder if owing all these dollars keeps the US dollar artificially inflated? I mean if we owe a ton of dollars to people it's seems like it's in their best interest to make sure those dollars are worth something. I feel like this is a real balancing act, almost a house of cards. Pull out one card and it all falls down. Personally since I live in a foreign country I find this a little concerning. Right now things are great. The dollar's currently about 13-1 against the peso so things are good. But should the dollar drop suddenly I could find my rent going from a couple hundred to over a grand in a very short time. Not only would my rent go through the roof so would all my living expenses.

Any one with financial experience have any thoughts on your debt? What the dollar value might be in the near future?
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Old 04-22-2009, 06:55 AM   #2 (permalink)
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If the U.S., for some cataclysmic reason, defaulted on its loans, what would China do?
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Old 04-22-2009, 07:09 AM   #3 (permalink)
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Hmmm seems to me that again, when the music stops there will not be enough seats for everyone in the game of economy musical chairs.

which reminds me...of that 2007 Visa debit card commercial "Because money shouldn't slow you down!"


If I'm not mistaken cynosure, we hold land and factories in China to tune of almost that same amount. This is like a mutual assured destruction of both if both groups reneged on their obligations.
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Old 04-22-2009, 07:24 AM   #4 (permalink)
 
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well here's yet another of these philosophical problems. in neoliberal land, the economy is understood as a discrete system that floats in the air above everything else, populated by happy rational actors who think only of themselves but manage it in such a way that the rest of us should be grateful, and that floating system is itself thought of as closed and as tending toward equilibrium. so that means the sale of bonds at point a has to correspond to some future situation that will resemble that of point a--not because there's any particular basis for that, but because the way of thinking about the airborne system that is the economy forces you into it. this would not be problematic in itself, because it's always possible for folk to entertain loopy conceptions of things and none of them particularly matter. but neoliberals tend also not to like complexity very much so they tend to assume that there's one and only one way to think about the economy and that they know that one and only one way.

an alternate way of thinking about the economy is as a dynamic, open-ended collection of processes that the state can interact with or direct and that can be kept in motion in such a way that the situation at poin a may not particularly resemble the situation at a future point so that projections forward from point a really don't mean a whole lot--so long as the system continues to operate that is. neoliberals think the economy as a type of thing in any event, so motion is not really in their worldview--activity is, but somehow or another that's different from motion. if it weren't different from motion, you'd be hardpressed to see how this whole equilibrium thing made any sense, and besides it doesn't make sense even for neoliberals because they've against all reason substituted "growth" for "equilibrium" and well just look at the mess THAT created.

anyway, you can see in these conceptions of the future two different ways of basically throwing the dice--one that assumes for aesthetic reasons stasis, even as it likes to blab about growth, and the other that assume motion and/or expansion (they aren't necessarily the same) and debt as an enabling device which underpins the actions of the state, the function of which is (in part) to direct the economic systems toward desirable political and/or social ends. so for neoliberals, debt is scary; for more keynesian types, it's a non-issue.

unless the party stops. but if the party stops, we're all fucked anyway to the extent that we live inside the party.

so i think this is a non-question.

nation-states are emptier and emptier every day emptier and emptier. modern capitalist nation-states are mostly creations of the 20th century in any event, so they haven't been around that long and haven't worked out so well think maybe the same problems as the bourgeois nuclear family. a stupid idea that doesn't work but that does enable a certain illusion of autonomy, most of which is obtained by not thinking real hard about what autonomy might be.

neoliberals typically have an even bigger problem facing the dissolution of the nation-state than they have with the arbitrariness of their positions on the economy, so you can imagine that this transnational bond-holding business is all terribly upsetting to them.

the other structuring fiction for alot of these folk is that they think the state is like a giant individual and that the state's relation to debt is like that of an individual's relation to their credit card. i think that's quaint.
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Old 04-22-2009, 09:58 AM   #5 (permalink)
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Quote:
Originally Posted by Cynosure View Post
If the U.S., for some cataclysmic reason, defaulted on its loans, what would China do?
Foreclose and own us or more like US. Either that or just start having the US citizens make clothes for them at .04 an hour.
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Old 04-22-2009, 10:44 AM   #6 (permalink)
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Quote:
Originally Posted by Cynosure View Post
If the U.S., for some cataclysmic reason, defaulted on its loans, what would China do?
In short, the American bond market would collapse and America would have to cut much of the military budget just to make ends meet.
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Old 04-22-2009, 02:32 PM   #7 (permalink)
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Quote:
Originally Posted by Baraka_Guru View Post
In short, the American bond market would collapse and America would have to cut much of the military budget just to make ends meet.
You don't understand the states at all. The US government would cut every program other then the military.
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Old 04-23-2009, 05:08 AM   #8 (permalink)
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Quote:
Originally Posted by Tully Mars View Post
You don't understand the states at all. The US government would cut every program other then the military.
Oh, I think there'd be total carnage in the US if way over $1tn of 'entitlement' or 'pacification' programs were cut.

The military maintains the international pre-eminence, the pacification programs are the bare minimum to keep the domestic populace in line.

Not just the poorest, either... Generally the middle classes of every nation are the largest nibbler on governmental knockers(breasts). Direct and indirect.
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Old 04-23-2009, 07:34 AM   #9 (permalink)
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Oh you scare enough people that "they" are coming to kill you and you'll have them sending in their entitlement checks and planting victory gardens.
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Old 04-23-2009, 09:33 AM   #10 (permalink)
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You can't feed a family entirely on a victory garden, particularly in an urban block.

You can, however, cause chaos.
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Old 04-23-2009, 09:56 AM   #11 (permalink)
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Quote:
Originally Posted by Tully Mars View Post
Wonder if the US is ever going to start living within it's means?
This is going to depend a great deal on the next year or so. Clearly it's become a lot more difficult to live in denial, but does that mean that we can change to a more responsible national lifestyle? I honestly wish I knew, but at this point it could go either way.
Quote:
Originally Posted by Tully Mars View Post
Any one with financial experience have any thoughts on your debt? What the dollar value might be in the near future?
When you say "your debt" you mean the national debt and not personal debt, right?

If you mean the national debt, assuming things continue on their current course there will be a breaking point where it's no longer prudent to invest in the US and things start to free-fall. This free fall will be the great American bubble burst. Future generations will use this as their prime example of economic failure in a modern society for generations the way we might use Russia.

As far as personal debt, I don't really have any. I bought my house from a family member and was able to pay it off quickly enough, I own my car, furniture, electronics, etc. Sure, I have small credit card debt, but I pay it off completely every month. Right now I think there's a $30 dinner charge from Aquis (great restaurant, if you're ever in San Jose you should stop by) on my Visa and I'll pay that off when my next payment is due. That's it. I'd be a massive hypocrite if I had a lot of debt, considering how often I speak out against the debt system. I don't think debt and credit should exist at all. If I remember correctly, the size of the Credit Default Swaps market is about $64t and the GDP of the entire planet is about $56t. If that's not an indication that there's a big problem, I don't know what is. I understand that people are raised in an economic reality that includes debt and credit as necessities, but they enable the kind of insane economic problems that we're seeing right now so effectively. So long as people—and governments—have the option of spending money they don't have, they will do so. It's not even a matter of people not being responsible, because you can only expect your average person or government to be so responsible before giving into having seemingly free money. It's too much temptation, and when you combine that with really stupid economic theory, the theory that RB so eloquently outlined in the second sentence of his post above, it can only result in massive wealth inequality and instability... and substantial debt.

Edit: here's the link for the GDP vs. CDS market statistic.

Last edited by Willravel; 04-23-2009 at 10:09 AM..
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Old 04-23-2009, 09:57 AM   #12 (permalink)
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Quote:
Originally Posted by tisonlyi View Post
You can't feed a family entirely on a victory garden, particularly in an urban block.
Tell that to the Cubans. But I get your point. I just think you underestimate the amount of pull the military industrial complex has in the states. The lengths they'll go to keep the cash cow alive is stunning, IMHO.
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Old 04-23-2009, 10:02 AM   #13 (permalink)
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Tell that to the Cubans.
Actually, now we can tell the Cubans! To their faces! In their own country!

I can't wait to get my hands on a legal and verifiable Cuban cigar...
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Old 05-02-2009, 04:06 PM   #14 (permalink)
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Ah, to live under Cuba. What a wonderful subterra world.
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Old 05-05-2009, 08:32 AM   #15 (permalink)
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Oh, and, funny that you said there are actually COUNTRIES. lol, world shadow leaders.
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Old 05-05-2009, 03:16 PM   #16 (permalink)
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Originally Posted by Cynthetiq View Post
which reminds me...of that 2007 Visa debit card commercial "Because money shouldn't slow you down!
Ha-ha-haaa! That video is so-ooo indicative of the Big Problem, which involves the U.S. economy and the dependent lifestyle of its people. And what's really ironic and sadly funny is that Visa is so arrogant and so insensitive to the problem (at least, they were back in 2007), that they would actually create a commercial like that.
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