August 5, 2004

SUCKERS:

Foreigners own half US debt, tipping point unclear (Laura MacInnis, 8/04/04, Reuters)

Data showing foreigners own half the U.S. debt has raised concerns about a possible tipping point for America's reliance on foreign capital, though the U.S. Treasury Department sees little risk from the holdings.

A graph in a Treasury Department report this week on borrowing needs showed foreign holdings made up 50 percent of total privately held U.S. public debt, which excludes Federal Reserve holdings, as of May 31.

Foreign holdings accounted for just 20 percent of U.S. debt in 1993 but they have swelled in recent years as Asian banks loaded up on U.S. Treasuries, seeking to depress their currencies against the dollar to boost exports.

Economists say the influx of offshore capital has helped support the U.S. economy by lowering market interest rates and bridging the country's large budget and trade deficits.


Americans--through 401ks, IRAs and the like--own stock in lean, mean, cash-rich, hyper-competitive corporate America. The foreigners own stock in our debt-saddled, bloated government. Who should be worried here?

Posted by Orrin Judd at August 5, 2004 2:58 PM
Comments

I think if there was ever a run on collecting those debts, the obvious solution would be to
slash the fed govt. back to stone age to pay them.
I'm not sure what the downside is? We could
finally get rid of HUD, NEA, EEOC etc., etc.

Posted by: J.H. at August 5, 2004 3:10 PM

Why pay them?

Posted by: oj at August 5, 2004 3:16 PM

So they'll sell us TVs.

Posted by: Harry Eagar at August 5, 2004 4:23 PM

If there was ever a run on the federal debt obligations, the solution is the usual one-- inflation, hyperinflation and then default. So the worst is that we'd just become another Brazil, and that isn't really in the best interest of those debt holders. They like having a safe, trusted place to park their dollars knowing they won't evaporate in a few years.

Posted by: Raoul Ortega at August 5, 2004 5:39 PM

Harry:

Let Africans assemble them. We can sell them new bonds.

Posted by: oj at August 5, 2004 6:08 PM

And they will buy them.

Posted by: jim hamlen at August 5, 2004 6:34 PM

Ummm, it's not just bonds...

The Dutch, for example, own a majority of the commercial real estate in Washington, DC. Good thing those Dutch aren't wacky, isn't it?

Posted by: John at August 5, 2004 6:51 PM

John:

Or what?

Posted by: oj at August 5, 2004 7:29 PM

They are starting to not buy our bonds. Foreign purchase of government debt is heading down. Most of our debt is short term, 5 years or less. If the foreign governments won't buy it, The Fed will. So, within 5 years or so we may own all of our own bloated welfare state debt. But we just owe it to ourselves, right?

That corporate stock is getting leaner and meaner all the time. Check the markets lately?

Posted by: Robert Duquette at August 6, 2004 10:41 AM

Andrew Mellon isn't dead after all, at least not here.

Posted by: Harry Eagar at August 6, 2004 2:28 PM
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