2010 Jan 17 - Sun

They Who Have The Money

Sometime this last week, someone made the observation of the fact that there was a 'hidden buyer' buying a large amount of treasuries during the weekly US Treasury auctions. There was speculation it might be the Chinese operating through private proxy parties.

The US government has a problem with all the money they are spending. Some one has to loan it to them. Hence the regular treasury auctions.

A couple figures came to mind. I believe I recall seeing that the Chinese have over one trillion US dollars due to trade imbalance between the US and China. Another figure has to do do with the fact that the US government has added over a trillion dollars to their defict through recent spending.

If you put those two numbers together, and tie them together with the 'hidden buyer' observation, perhaps it could be said that the Chinese are converting their US dollar currency holdings into US Treasury holdings. That way, not only have they made money through their exports, but they make additional revenue through the yields on the treasuries purchased.