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Foreign demand falls for Treasuries

ptif219

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China is selling our debt what will this do to our economy? Obama's out of control spending may need to stop.


FT.com / US / Economy & Fed - Foreign demand falls for Treasuries


Foreign demand for US Treasury securities fell by a record amount in December as China purged some of its holdings of government debt, the US Treasury department said on Tuesday.

China sold $34.2bn in US Treasury securities during the month, the US Treasury said on Tuesday, leaving Japan as the biggest holder of US government debt with $768.8bn. China overtook Japan as the largest holder in September 2008.

The shift in demand comes as countries retreat from the “flight to safety” strategy they embarked on upon during the worst of the global economic crisis and could mean the US will have to pay more to service its debt interest.

For China, the shedding of US debt marks a reversal that it signalled last year when it said it would begin to reduce some of its holdings. Any changes in its behaviour are politically sensitive because it is the biggest US trade partner and has helped to finance US deficits.
 
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China is selling our debt what will this do to our economy? Obama's out of control spending may need to stop.

Kind of funny how our debt has been growing steadily for 30 years but only now it is "Obama's" out of control spending. I wonder what it was called when Reagan was doing it.

history.gif
 
Kind of funny how our debt has been growing steadily for 30 years but only now it is "Obama's" out of control spending. I wonder what it was called when Reagan was doing it.

history.gif

Funny how you go off topic on the first post.

Tripling what Bush did in 8 years in one year is the largest increase by a first year president.

Now how about addressing the questions in the OP.
 
Funny how you go off topic on the first post.

You commented on Obama's "out of control spending". I pointed out you're a partisan hack who doesn't care about how the money is being spent unless there is a Democrat is in power.

Tripling what Bush did in 8 years in one year is the largest increase by a first year president.

So it was okay when Bush was doing it. Not okay when Obama does it. Your selective outrage is quite obvious.

Now how about addressing the questions in the OP.

There are no questions in your OP. Just silly rhetoric.
 
China has been keeping its currency artificially low (about 6.8 yaun per dollar).

The dollar recently rallied recently due to the economic events in europe, so this may be an act by the chinese to maintain its pegged position on the dollar. I am not certain though.
 
Kind of funny how our debt has been growing steadily for 30 years but only now it is "Obama's" out of control spending. I wonder what it was called when Reagan was doing it.

history.gif

The graph is striking to see how the debt grew after the unfunded tax cuts to the wealthy coupled with increased military spending under Reagan And W.

The only time we leveled off the debt after Reagan was when we raised the taxes a bit on the wealthy and reduced military spending.

If we are truly concerned about reducing the debt, we need to do the same thing today.
 
The graph is striking to see how the debt grew after the unfunded tax cuts to the wealthy coupled with increased military spending under Reagan And W.

The only time we leveled off the debt after Reagan was when we raised the taxes a bit on the wealthy and reduced military spending.

If we are truly concerned about reducing the debt, we need to do the same thing today.

The U.S. fiscal position is beyond the point where a few tweaks can fix things. Everything needs to be on the table. Entitlement programs, particularly Medicare, need to be reformed to make them fiscally sustainable. The tax structure needs to be changed so as to provide sufficient revenue to meet the nation's priorities. All discretionary programs need to be reviewed and every department needs to improve its productivity to do more with each dollar expended. No department should be exempt. Regular independent audits of the major departments should be undertaken to verify that they are achieving productivity gains, have adequate systems for measuring their financial performance relative to their departmental objectives, etc.

Sadly, at this stage of the game, the implied political consensus is to do nothing substantive. On one end, political leaders want to treat certain mandatory spending and discretionary programs as almost sacred cows exempt from serious changes. On the other, some want to leave in place a tax structure that chronically provides inadequate revenue, even wanting to cut revenue further. Relying on foreigners to essentially finance a growing share of the nation's costs--from national security to health care--is not sustainable indefinitely.
 
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Funny how you go off topic on the first post.

Tripling what Bush did in 8 years in one year is the largest increase by a first year president.

Now how about addressing the questions in the OP.

That is an out right lie. Obama has not trippled the Bush debt increase in his first year in office... far far far far far from it.
 
The U.S. fiscal position is beyond the point where a few tweaks can fix things. Everything needs to be on the table. Entitlement programs, particularly Medicare, need to be reformed to make them fiscally sustainable. The tax structure needs to be changed so as to provide sufficient revenue to meet the nation's priorities. All discretionary programs need to be reviewed and every department needs to improve its productivity to do more with each dollar expended. No department should be exempt. Regular independent audits of the major departments should be undertaken to verify that they are achieving productivity gains, have adequate systems for measuring their financial performance relative to their departmental objectives, etc.

Sadly, at this stage of the game, the implied political consensus is to do nothing substantive. On one end, political leaders want to treat certain mandatory spending and discretionary programs as almost sacred cows exempt from serious changes. On the other, some want to leave in place a tax structure that chronically provides inadequate revenue, even wanting to cut revenue further. Relying on foreigners to essentially finance a growing share of the nation's costs--from national security to health care--is not sustainable indefinitely.

Getting out of Iraq and Afghanistan would go a long way towards that.
 
China has been keeping its currency artificially low (about 6.8 yaun per dollar).

The dollar recently rallied recently due to the economic events in europe, so this may be an act by the chinese to maintain its pegged position on the dollar. I am not certain though.

When wealth increases, for the most part, savings decreases. The national wealth of China has increased quite a bit, and we are safe to refer to their foreign reserves as national savings.
 
Getting out of Iraq and Afghanistan would go a long way towards that.

Iraq and Afghanistan's costs, even assuming a decade longer involvement at current levels, which is inconsistent with U.S. policy) are still relatively small compared to the fiscal imbalances associated with Medicare. There is really no way around it. Medicare is unsustainable in its present form.
 
Iraq and Afghanistan's costs, even assuming a decade longer involvement at current levels, which is inconsistent with U.S. policy) are still relatively small compared to the fiscal imbalances associated with Medicare. There is really no way around it. Medicare is unsustainable in its present form.

Do you believe the health reform was an appropriate cost cutting tool?
 
Do you believe the health reform was an appropriate cost cutting tool?

Goldenboy219,

Health care reform could provide such an impact if it is designed properly. However, political efforts were made to gut even modest cost-savings tools e.g., existing physician payments schemes.

Overall, from having read the various CBO analyses on the health care legislation as it evolved, I saw little evidence that the legislation tamed overall increases in health costs. In the out years, one still saw increases in health expenditures of approximately 7%-8% per year. IMO, it is that shortcoming, more than anything that was in the various iterations of the legislation, that was a fatal defect. In its absence, budget neutrality could only be maintained from increasingly onerous tax hikes to cover those rising costs.

My criteria for judging health care reform was and remains:

1. Does the proposed reform significantly reduce the incidence of uninsured persons? CBO said the bills did that

2. Is it budget neutral? CBO suggested that within the timeframe it analyzed that it was. Some concerns existed about years beyond that timeframe

3. Does it address the chronic imbalance whereby national health expenditures persistently rise in excess of nominal economic growth? CBO projections showed no appreciable change in that area.

Ultimately, national health expenditures cannot continue to rise faster than nominal GDP growth indefinitely. Otherwise, the excess would need to be made up from foreign financing, once the nation's economic base becomes increasingly insufficient to cover health costs. By that, I mean it cannot provide sufficient financing without the financial burden's adversely impacting the economy's overall growth trajectory. Foreigners are not likely to do so forever. Otherwise, they would be assuming unlimited risk.

In sum, at least in my view, effective health reform needs to address the issue of chronic growth of health expenditures in excess of GDP, in addition to the other two criteria. Doing so will almost certainly require comprehensive entitlement reform, elimination of industry protections e.g., the bar on drug reimportation that essentially uses the law to preserve an arbitrage situation, comprehensive medical liability reform, permitting interstate competition in insurance, permitting foreign medical institutions to compete in the domestic health market (transparent and consistent licensing standards for domestic and foreign practioners should apply), and putting in place incentives/payment practices/tax code changes that allow for a large-scale restructuring of the hospital industry (from which the largest share of health inflation arises), increasing portability and counter-cyclicality, etc. I believe Harvard University Business School professor Michael Porter put it best when a few years ago he observed that the health industry (industry practices, regulatory standards, laws, payment practices) is so dysfunctional that the normal rules of supply and demand are irrelevant.
 
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You commented on Obama's "out of control spending". I pointed out you're a partisan hack who doesn't care about how the money is being spent unless there is a Democrat is in power.



So it was okay when Bush was doing it. Not okay when Obama does it. Your selective outrage is quite obvious.



There are no questions in your OP. Just silly rhetoric.
Why don't you show us a chart that goes past 2005. Of course our monitors may not be tall enough to show all of the bars.
 
The U.S. fiscal position is beyond the point where a few tweaks can fix things. Everything needs to be on the table. Entitlement programs, particularly Medicare, need to be reformed to make them fiscally sustainable. The tax structure needs to be changed so as to provide sufficient revenue to meet the nation's priorities. All discretionary programs need to be reviewed and every department needs to improve its productivity to do more with each dollar expended. No department should be exempt. Regular independent audits of the major departments should be undertaken to verify that they are achieving productivity gains, have adequate systems for measuring their financial performance relative to their departmental objectives, etc.

Sadly, at this stage of the game, the implied political consensus is to do nothing substantive. On one end, political leaders want to treat certain mandatory spending and discretionary programs as almost sacred cows exempt from serious changes. On the other, some want to leave in place a tax structure that chronically provides inadequate revenue, even wanting to cut revenue further. Relying on foreigners to essentially finance a growing share of the nation's costs--from national security to health care--is not sustainable indefinitely.

I could agree with all of that if we include the areas where we are most out of whack with the rest of the industrialized world such as our military spending, where we spend as much as the rest of the world combined, as opposed to some areas where we fall behind all the rest if the industrialized world, such as providing affordable health care for all of our citizens.
 
Iraq and Afghanistan's costs, even assuming a decade longer involvement at current levels, which is inconsistent with U.S. policy) are still relatively small compared to the fiscal imbalances associated with Medicare. There is really no way around it. Medicare is unsustainable in its present form.

I agree the out of control medical costs are the biggest hurdle but the price tag for our wars in Iraq and Afghanistan are hardly insignificant. The bill in December 2008 was $1 trillion dollars.

The $1 Trillion Bill for Bush's War on Terror - TIME
 
I could agree with all of that if we include the areas where we are most out of whack with the rest of the industrialized world such as our military spending, where we spend as much as the rest of the world combined, as opposed to some areas where we fall behind all the rest if the industrialized world, such as providing affordable health care for all of our citizens.

DOD should not be immune to being asked to become more productive, though one should not lose sight of the fact that the U.S. has a need for a larger and more effective military capability than many other countries do given its myriad critical interests. In fact, if DOD were exempted, such a move could actually undermine long-term U.S. national security capabilities. For example, if the operating costs associated with U.S. military operations grew sufficiently execessive relative to those of its enemies, that would increase the likelihood of success of relatively low-level attrition-driven campaigns conducted against the U.S. and its interests. The key for enemies would merely be to exploit U.S. financial challenges/inefficiencies until the U.S. operation became unsustainable from a budgetary or political standpoint.

Doing so would likely require a robust and comprehensive examination and, afterward, regular "audits" so to speak. Such an examination would need to encompass, among other areas, military doctrine, financial/information/Intelligence systems, improved procurement practices, assessment of tradeoffs/opportunity costs associated with technology vs. manpower (lack of adequate manpower was exposed as a problem in both Iraq and Afghanistan, hence the need for troop surges in both cases), a framework that provides for greater flexibility in responding to immediate national security issues, development of a more robust strategic and tactical planning process, etc.
 
I agree the out of control medical costs are the biggest hurdle but the price tag for our wars in Iraq and Afghanistan are hardly insignificant. The bill in December 2008 was $1 trillion dollars.

The $1 Trillion Bill for Bush's War on Terror - TIME

To be sure, I didn't state that the costs were insignificant. I stated that they were small relative to those associated with the perpetual horizon mandatory spending programs.
 
China by selling a percentage of their substantial holdings of US Treasuries should be seen as sending the message to the US 'Get your spending under control'.

Attempting to bring Left or right Politics into this discussion is merely a distraction.

Simply put China is saying what every other holder of US debt is saying.
 
China by selling a percentage of their substantial holdings of US Treasuries should be seen as sending the message to the US 'Get your spending under control'.

Attempting to bring Left or right Politics into this discussion is merely a distraction.

Simply put China is saying what every other holder of US debt is saying.

I just heard in my "Political Economy of Iraq" class from my professor that China is actually still buying the same amount of our treasury bills but it is just through more intermediaries in London and France. He use to work for the American government in Iraq, he knows his stuff.

So as much as debt is a huge problem for the US, China isn't giving us any different signals now. but I do have no idea why they are buying our debt in a much more hidden way now, maybe that is the signal. idk
 
DOD should not be immune to being asked to become more productive, though one should not lose sight of the fact that the U.S. has a need for a larger and more effective military capability than many other countries do given its myriad critical interests. In fact, if DOD were exempted, such a move could actually undermine long-term U.S. national security capabilities. For example, if the operating costs associated with U.S. military operations grew sufficiently execessive relative to those of its enemies, that would increase the likelihood of success of relatively low-level attrition-driven campaigns conducted against the U.S. and its interests. The key for enemies would merely be to exploit U.S. financial challenges/inefficiencies until the U.S. operation became unsustainable from a budgetary or political standpoint.

Yes, that was OBL's stated plan. And its been working! However, I do not understand what do you mean by this:"U.S. has a need for a larger and more effective military capability than many other countries do given its myriad critical interests."

What are our myriad critical interests that require a larger more effective offensive military capability?

Our current military spending almost equals the rest of the world combined. Why would cutting that spending by 50% hurt our defensive capability?
 
China by selling a percentage of their substantial holdings of US Treasuries should be seen as sending the message to the US 'Get your spending under control'.

Attempting to bring Left or right Politics into this discussion is merely a distraction.

Simply put China is saying what every other holder of US debt is saying.

There is no left/right issue with military overspending. Both parties have supported it and it is major part of our government's overspending problem.
 
You commented on Obama's "out of control spending". I pointed out you're a partisan hack who doesn't care about how the money is being spent unless there is a Democrat is in power.



So it was okay when Bush was doing it. Not okay when Obama does it. Your selective outrage is quite obvious.



There are no questions in your OP. Just silly rhetoric.

You make a lot of false assumptions. The point is what happens to our economy and the value of our currency if China is selling off our debt?
 
The graph is striking to see how the debt grew after the unfunded tax cuts to the wealthy coupled with increased military spending under Reagan And W.

The only time we leveled off the debt after Reagan was when we raised the taxes a bit on the wealthy and reduced military spending.

If we are truly concerned about reducing the debt, we need to do the same thing today.

You mean during Clinton?
 
China is selling our debt what will this do to our economy? Obama's out of control spending may need to stop.


FT.com / US / Economy & Fed - Foreign demand falls for Treasuries


Foreign demand for US Treasury securities fell by a record amount in December as China purged some of its holdings of government debt, the US Treasury department said on Tuesday.

China sold $34.2bn in US Treasury securities during the month, the US Treasury said on Tuesday, leaving Japan as the biggest holder of US government debt with $768.8bn. China overtook Japan as the largest holder in September 2008.

The shift in demand comes as countries retreat from the “flight to safety” strategy they embarked on upon during the worst of the global economic crisis and could mean the US will have to pay more to service its debt interest.

For China, the shedding of US debt marks a reversal that it signalled last year when it said it would begin to reduce some of its holdings. Any changes in its behaviour are politically sensitive because it is the biggest US trade partner and has helped to finance US deficits.

I suspect we will see an increase in the US government purchasing its own debt using a third party as a middle man just as they have been doing recently.
 
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