View Full Version : "China Changes its Mind and Slashes New Purchases of US Debt !"

04-14-2009, 02:22 AM
China Slashes New Purchases of US Debt

"Tell The Treasure To Stop the Presses,China Isn't buying U.S. T bills Anymore !"

On March 24, 2009, the government controlled Chinese People's Daily reported China planed to continue to purchase US debt. China will continue investing in U.S. government bonds while paying close attention to possible fluctuations in the value of those assets, said a deputy governor of China's central bank here Monday. This statement was made a week before the recent G20 conference in London. Apparently it was meant to take questions of Chinese continued support of US deficit spending off the table. It also undoubtedly helped strengthen the dollar. This past weekend China's central bank made a stunning reversal. snip

Take the figures reported by the Chinese central bank in the article above and compare them to official figures from the US Treasury Financial Management Service and the simple analysis is telling.

In the first quarter of 2008, the Chinese purchased $153.9 billion US Treasuries funding a massive 74.7% of our $205.9 billion in deficit spending for that period.

In the first quarter of 2009, the Chinese purchased a net $7.7 billion US Treasuries funding a mere 2.7% of our $276.3 billion deficit for the period.

Although many have raised the specter of the US Federal Reserve printing dollars to buy US Treasuries no one knows for sure how much money the Fed has been printing.

The Federal Reserve and Treasury has refused to release detailed information resulting in Fox Business News filing a Freedom of Information Act lawsuit last year. FBN recently won the lawsuit over government objections, but most of the 10,000 pages released to FBN in late March were redacted. The litigation over the information is likely to continue as the Fed and Treasury try to keep this out of the headlines.

While we still don't exactly how much debt the Fed is purchasing with printed money, we know the Chinese are out of the market. For those fearing our recent bailouts and stimulus plans will cause runaway inflation this is an ominous sign.