|
Just how much does China have the U.S. by the balls?
|
View this Thread in Original format
| MisterOpus1 |
Uhh, nearly the whole sack really:
| quote: | Dollar at mercy of central banks
By Chris Giles, Economics Editor
Published: January 24 2005 02:00 | Last updated: January 24 2005 02:00
During the past few years the US has become dependent, not so much on millions of investors around the globe but on a few individuals in a few of the world's central banks.
In 2003, the most recent year with full international statistics, central banks financed 83 per cent of the US current account deficit, with Asian central banks accounting for 86 per cent of flows.
A similar picture is emerging for 2004. Despite a good start to the year, when the private sector was a large net purchaser of dollar assets, central banks came to the rescue again. The People's Bank of China has let it be known that China increased dollar reserves by $207bn (€159bn) in 2004, financing nearly a third of the US current account deficit, estimated at $650bn.
Self-interest has supported much of this flow of cash. The US has lapped up cheap finance to fund its unquenchable appetite to spend. Asian governments have until now been keen to oblige, in order to keep their currencies from appreciating. But all investors have their limits and they may start worrying about their degree of exposure.
If new official flows to the US were to be curtailed, the dollar would plunge, creating a huge hole in the accounts of central banks holding dollars.
"The risk exposure for Asian central banks is already great," concluded Matthew Higgins and Thomas Klitgaard of the Federal Reserve Bank of New York in a recent paper.
In November, Alan Greenspan, US Federal Reserve chairman, suggested foreign investors would reach a limit in their desire to finance the US current account deficit and diversify into other currencies or demand higher US interest rates, "elevating the cost of financing" the deficit and rendering it increasingly less tenable".
Until recently there had been little evidence to back up these fears but this has begun to change. Members of the Organisation of Petroleum Exporting Countries have cut the proportion of deposits held in dollars from 75 per cent to 61.5 per cent in the past three years.
The Bank of Thailand said this month it was considering reducing the proportion of its $50bn reserves held in dollars from 80 per cent to 50 per cent. Russian officials have made similar noises.
A detailed survey out today suggests that central banks are increasingly moving official reserves out of the dollar and into the euro.
Asian central banks are unlikely to pull the plug on dollar assets altogether. But they may be close to ending their willingness to provide cheap financing for an ever increasing US current account deficit.
http://news.ft.com/cms/s/bd52ee06-6...000e2511c8.html |
Central banks holding 83%, and the Asian banks holding 86% of that? Oh boy.
Sorry about all the emphasis, which is mine. I shoulda just highlighted the whole damn article.
But back to point - this is why our deficits matter a great deal, and any talk about adding more $ to that deficit, including tax cuts, SS private accounts (or as the WH is calling them now - "personal accounts"), Medicare, etc. needs to be seriously reconsidered. We're starting to get dangerously close to getting majorly ed. |
|
|
| Trancer-X |
| quote: | Originally posted by MisterOpus1
We're starting to get dangerously close to getting majorly ed. |
I'm happy to see that someone else has finally figured this out! |
|
|
| Yoepus |
Actually this means the US has China by the balls.
Have you heard :
"Loan a little from the bank, the bank owns you.
Loan a lot from the bank, you own the bank."
? |
|
|
| Trancer-X |
| quote: | Originally posted by Yoepus
Actually this means the US has China by the balls.
Have you heard :
"Loan a little from the bank, the bank owns you.
Loan a lot from the bank, you own the bank."
? |
I think you may be confused. They're not loans to China. China has been buying OUR debt.
"Permit me to issue and control the money of a nation, and I care not who makes the laws."
- Meyer Amshell Rothschild
"When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes... Money has no motherland; financiers are without patriotism and without decency; their sole object is gain."
- Napoleon Bonaparte |
|
|
| Dervish |
It's like owing Tony Soprano. If they decide they want to you up they can. Restrict the USs ability to get cheap credit when they need it most, or increase rates. Any they can them big style.
Your sig says it like it is Trancer-X! :p |
|
|
| zig |
Forex traders (currency traders) have been warning of this scenario for a long time.....and in the past year the currency markets in general agree with them..the euro has seen a dramatic rise against the dollar of nearly 50%..this gain is allmost entirely due to worries about the american current account deficit.
The federal Reserve is expected to rise interest rates in the first week in febuary and this for the moment is propping up the dollars slide from its december low.But traders are unsure whether this can be sustained even if the federal reserve does raise rates..
So all eyes on Alan Greenspan....yet again |
|
|
| josh4 |
| quote: | Originally posted by Trancer-X
I think you may be confused. They're not loans to China. China has been buying OUR debt.
|
How and why would they do that? |
|
|
| Dervish |
| quote: | | Over 47% of the personal income taxes (but not of total tax revenue) collected in 2003 will be spent on paying interest on the debt. |
Wikipedia
Ahhhhhh so now we know why the US doesn't have a national health service........ :toothless |
|
|
| zig |
most of those links are very old mid 2003....old in currency terms given the fall in the dollar in the last 12 months....just a point.. |
|
|
| zig |
Here ya go.......blame Bill Gates.......
Microsoft payout tilts the scales in US deficit
January 24, 2005
By Vivien Lou Chen
San Francisco - Microsoft's $32.6 billion (R195.6 billion) special dividend payment last month raised US personal income and probably worsened the fourth-quarter current account deficit, said the commerce department.
About $24 billion of the payment will be recorded as personal dividend income in December, for an annual rate of $288 billion, the department's bureau of economic analysis said at the weekend.
That's enough to boost total US personal income by 2.9 percent in the month, according to Bloomberg data.
The $3 a share, one-time payout by the world's third-biggest company by market value follows investor demands to return cash and is the largest return of capital for a US company.
"One-time events ... can have a large effect on the quarterly and monthly estimates" because they were based on annual rates, the statement said.
Bureau spokesperson Ralph Stewart said the statement had been issued to answer questions about the dividend.
Microsoft had no comment on the conclusions, said spokesperson Kent Hollenbeck.
The projected surge in personal income would be the biggest since a 3.4 percent gain in December 1993, when many Americans took steps to increase earnings recorded that year ahead of tax increases expected to begin in 1994.
Personal income fell by the same percentage the following month, as the one-time gains were not repeated.
The US current account balance would "become more negative" by the amount of Microsoft dividends distributed to overseas shareholders, the bureau said.
The current account deficit, the broadest measure of trade, widened to a record $164.7 billion in the third quarter.
December figures for personal income are scheduled for release on January 31. Fourth-quarter current account figures will be released March 16.
In addition, total corporate profits from current production, a figure closely watched by economists, would decrease by the amount of dividends distributed to non-residents, the bureau said.
Microsoft chairman Bill Gates donated his $3 billion dividend payment to charity. He and chief executive Steve Ballmer hold more than 13 percent of the stock.
.............................mind you Americans wont be getting all of the cash.....i got some as well :D :D :D :D |
|
|
| Yoepus |
| quote: | Originally posted by Trancer-X
I think you may be confused. They're not loans to China. China has been buying OUR debt.
|
I'm not, the analogy applies.
If the Chinese prefer to invest in the USA economy than their own, I'm not one to tell them no.;) |
|
|
|
|
