Posted on 10/27/2004 10:38:03 AM PDT by JFK_Lib
But a rash of new data, including Treasury Department figures released yesterday showing a net sell-off by foreigners of U.S. bonds in August, has stoked debate over whether overseas investors -- private individuals, institutions and government central banks -- are growing dangerously bearish on the U.S. economy.
It is a portentous issue. Foreign governments and individuals hold about half of the $3.7 trillion in outstanding U.S. Treasury bonds, for example, and the government has been heavily dependent on continued overseas bond purchases to finance the roughly $1 billion a day it has to borrow to pay its bills. Foreign lending and investment are also needed to finance the country's roughly $50 billion monthly trade deficit, while foreign capital has been a key prop to U.S. stock prices.
A turn in overseas attitudes toward the United States could ripple deeply through the economy, depressing the market, raising interest rates and pushing down the value of the dollar.
In August, foreign private investors actually sold $4.4 billion more in Treasury bonds and notes than they bought that month, the Treasury Department said yesterday -- the first time in a year that net foreign purchases were negative. That followed a 20 percent decline in July that shrunk net foreign purchases to $18.3 billion.
.....
Foreign purchases of stocks are off as well, going from net purchases of $9.7 billion in July to a net sell-off of $2.1 billion in August. Over the past 12 months, private foreign investors have purchased a net of $17 billion in U.S. stocks, compared with $30 billion in the 12 months before that.
Measuring the combined purchase of stocks, corporate bonds and government debt, overall capital flows into the United States fell in August for the sixth straight month.
(Excerpt) Read more at washingtonpost.com ...
It would seem that a falling dollar is good for exports, as long as it is reasonable and steady.
A precipitous drop from Russia leaving the dollar for the Euro in its oil purchases, combined with the Chicoms decoupling the Wahn could cause a panic sell off of US dollars.
Anyone think this is possible or likely?
Or could it be that interest rates are up a few ticks?
We need a balanced budget amendment passed once and for all in Bush's next term. It's time to stop creating debt, start paying it off, and closing the trade deficit. Then and only the will no country on Earth be able to match our economic might.
Soros and Co.?
It's as plain as the noose on our face, oil!
A balanced budget? From this president?
Soros and Co.
puhfreaking leeze. WHAT are they going to leave the dollar for? The euro?
just go look at a long term chart of the dollar (or any other currency). Go to MRCI.com -- they have them for free. Currencies move up and down, and these movements affect one another.
Money always looks for a way to make money. The dollar is the currency of the strongest, smartest money machine in the world. Never forget that.
Whatever else foreign investment bigshots are, they are greedy as all get out and they are risk averse.
There is another possibility. Establish property rights in outer space. That would give a place for institutional investors to place their funds and would leverage the economy to unthinkable heights. The rest of the world would have to follow suit, and they can't. We'll never look back and they won't be able to even see where we went we'll be so far ahead.
Supply and Demand: If there is divestment (ie. more US Bonds, both old and NEW out there) then SUPPLY goes up.
If supply is up, AND the US still has to finance its debt by this method, then the Fed has to make it worthwhile for the investor by increasing the YIELD on this investment 'Instrument'.
If it increases the 'Yield' this is called INFLATION.
As a Financial Representative and Money Manager, here is my take:
The interest rates on government bonds here have fallen in the last month. With the dollar having weakened, foreign investors are looking at other options. Having said that, we can easily absorb this selling. There are over $5 Trillion in Money Market and Savings Accounts in this country. These funds would love to be able to earn some higher rates. A small rise in interest rates would easily absorb this.
I suggest that anyone needing a reality check on our economy and how wealthy our country is go the Federal Reserve web site and print out the latest version of the Flow of Funds Report. Some of the highlights:
$7 Trillion in Home Equity, over and above the total mortgage debt, including second mortgages, consolidations, etc.
The aforementioned $5 Trillion
Over $10 Trillion in Stock and Mutual Funds
A net worth of $46 Trillion, including all the debt we owe in this country. For those that are fearful of the future, rest assured that we are continuing to create wealth at a rate that is astonishing.
Hope this comforts many.
What would happen if KERRY SOROS took over...
Wanna see a real selloff....and a run to security....
IF WE TANK, THEY TANK.
IF WE TANK, THEY TANK.
The US Dollar is based on the greater fool theory, like it or not. The fractional reserve banking system says that as long as the money supply expands that everything is ok. As soon as expansion is stopped or interruped there is a problem. When it actually contracts and the printed dollars have no where to go, there will be hades to pay.
Our day of reckoning is coming. The government has foolishly overspent the US dollar for over 40 years. This is not a recent event but a bad habit. Anytime a countries total debt equals or exceeds its GDP that country gets a serious spanking in the foreign market. I don't know when our GDP got to 8 or 9 or 10 trillion dollars but I suspect it is a fabrication of numbers and not a real event.
The Chinese may not de couple from the dollar simply because any serious analysis of their banking system says that over half of their loans are non performing. The question becomes "If China decouples does the value of the yuan go up or down in relation to dollars??" The Chinese know it should go down in value, the rest of the world speculates that it may go up.
The purchase of oil in Euros is a bigger threat that would have a nearly instant effect on the US. If we are forced to purchase Euros to buy oil, we will be toast in a couple of years.
When the last wave of the Baby Boomers stops spending in around 2008 our economy will begin reeling in a way nobody has experienced since the Great Depression. It won't recover for many years. This is understood by all global smart money. Anything they can do to hasten our demise is in their favor.
Not all wars are fought with guns.
"We need a balanced budget amendment passed once and for all in Bush's next term."
LOL!! Please do not hold your breath, as you seem to be an intelligent fiscal conservative, something that is opposite of our President (who will be elected to a 2nd term, btw).
"A net worth of $46 Trillion,"
Which is a little more than half of the entitlements to be paid to the retiring Baby Boomers over the next 20-30 years.
Fat chance.
The weasels are in control of the chicken coop and intend to keep it that way.
And as interest rates rise, an increasing proportion of federal tax revenue will be diverted to meet the interest payments on the national debt.
"I am one of those who do not believe that a national debt is a national blessing, but rather a curse to a republic; inasmuch as it is calculated to raise around the administration a moneyed aristocracy dangerous to the liberties of the country."-- President Andrew Jackson - (1824)
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