Forum Post: What does China pay with when they buy US Treasury Securities?
Posted 12 years ago on Jan. 13, 2012, 7:30 p.m. EST by valfather
(286)
This content is user submitted and not an official statement
Anybody know?
MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES (in billions of dollars)
http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt
Is it bad to be over a trillion dollars in debt to a country we supposedly have hostile relations with? How could this happen?
I'm not sure how that relates to what is asserted in this video:
Why a Dollar & Euro Collapse Is Guaranteed
http://www.youtube.com/watch?v=TfHEz4plxtg
I believe the mathematical conclusion is correct, but I'm not sure exactly how money is willed into existence. Some people claim it's just the Fed creating it out of thin air and loaning it to the government at interests. If that's so, then what is the government borrowing from China, and how does that fit into the overall equation? It all get's really hazy. One thing's clear, a few wealthy baknsters are making a killing at our expense.
"Is it bad to be over a trillion dollars in debt to a country we supposedly have hostile relations with? How could this happen?"
It happened because the government is full of ass-clowns.
It is GOOD to be over a trillion dollars in debt to China because that number is so astronomical that we in the U.S. can count ourselves as having gotten China PREGNANT! I hope that the hard-working Chinese people does not discover or dare to ask where their labor-earned U.S. dollars went. We in the U.S. should count ourselves lucky that the Chinese government knows this fact well but they can suppress information effectively. However, it is in fact BAD to owe that much to anyone due to our government's incompetence. NO, we do NOT have hostile relations with China - no rational country is ever that stupid to their BANKER. The U.S. heeds that fact so it is that old quasi-stable Mutually Assured Destruction keeping the uneasy peace in the financial arena.
The last thing I think of when I think of the Chinese is stupid. I'm not really sure what their ultimate goal is. They are about as Communistic as Adam Smith these days. But something tells me they will not be the ones holding the short end of the stick when this settles out.
The people in the Chinese government want to continue to stay in power just like most leadership groups around the world, with ours included. Remember how Obama said something like he would not mind being a one-term President if he accomplished many great things in his first term? Well, that is out of the window now, right? China, being the banker to the U.S. helps stabilize their potentially explosive internal massive unemployment problem by circulating the U.S. dollars through U.S. government borrowing and fiscal spending to boost U.S. consumers who buy Chinese goods so Chinese workers stay employed and not create the evil CIVIL UNREST that is bogeyman to the Chinese government. Let me say that China will NOT come out with the long end of the stick when this settles out but this does not mean that China will get the short end. If we play things right, there is a slight chance that we will both come out with the long end of the stick. Isn't this marvelous? Trust and cooperation can sometimes create great things out of absolutely nothing.
Not that I want a war with China, nor do I have hostile feelings toward them, but if the sh!t hits the fan in terms of resources, etc., and desperate times lead to conflict, China's manufacturing base will be to their advantage.
It is somewhat unlikely that it will be much of an advantage because China's manufacturing base is largely making commercial products, not military hardware. Let us hope that the fan never gets hit, okay?
What's that old thing about swords and plowshares?
IIRC some of our most advanced aircraft components are now manufactured in China. They are based on US military technology.
But, yes. Let's hope and plan for no war.
May we live in peaceful times.
They are about to have a major change in their government (this year). We are handicapping the candidates. Sure is more important than who wins South Carolina.
It will be interesting how much they change. Also North Korea, asking for more food aid and maybe willing to talk? Don't ignore the foreign news for 2012.
You are correct, we do not have "hostile" relations with China... that was a quote from the guy's post.
But China is not a huge fan of our warships getting too close for comfort nor are they a fan of war with Iran. But hostile is far from the list of words to describe our relationship with China. They make too much money from us to be hostile. Plus if we learned anything from the movie Princess Bride, you don't start a land war in Asia.
Of course GWB didn't know that included Iraq and Afghanistan.
http://www.youtube.com/watch?v=LfWDilXZQEo
The U.S. rattles its "sword" around the world often. As for Iran, I am very concerned that Israel will unilaterally attack Iran to stop its nuclear weapons program and Iran will retaliate against the U.S. bases and troops deployed near Iran. Then the U.S. will hit back and all hell will break loose. The other path though less probable is that the U.S. succeeds in restraining Israel but Iran acquires nuclear weapons and eventually mount them on their missiles. That will make the Middle East into an vast armed camp that with its oil reserve will be quite capable of blowing the world economy to smithereens. That will be very ugly but we may have to go through a new cold war there to keep the peace, with nuclear missiles aiming at and lined up by the oil wells by nearly every country in the Middle East. Sooner or later the whole thing will blow up. God, Allah, Buddha, and whatever, help us! Yikes!
"Iran is not trying to build a nuclear weapon" - Panetta, Secretary of State.
It may very well be true technically speaking - upgrading to 20% enriched uranium is NOT building a nuclear weapon but that IS one step that makes nuclear weapons so much easier to build. The shame that Iran suffered in the very long Iran-Iraq war means that Iran will try very hard to become invulnerable, somewhat akin to the provocative attitudes of some elements of the Chinese military. Overcompensation is often a grave risk for many countries (China was "raped" in her weakened state repeatedly and Iran was not much different). There are and were just too many bullies around. Let us hope that the overcompensation does not backfire to make countries more vulnerable rather than less vulnerable.
Congrats. You're falling for the same type of propaganda they gave us about Iraq. China likes us too much
If Iran is really not building a nuclear weapon, it should have no problem letting the world journalists, scientists, and IAEA have visits of ALL of their nuclear facilities. The fact that Iran does NOT allow the visits even though it is a signatory to the Nuclear Non-Proliferation Treaty speaks volumes about its intentions. There is no real technical hurdles impeding the enrichment of the 20% enriched uranium to weapons grade. Perhaps Iran just wants to stop short of taking that final step but its behaviors have already triggered retaliations. I hope that Iran is not playing the same stupid game that Saddam Hussein played with his so-called weapons of mass destruction because miscalculations can be very painful for everyone.
Congrats you're falling for the same propaganda they got Americans to fall for about Iraq.
Let's bomb and invade Iran!!! They're not being open enough with the IAEA and others, even though when they were much more open about it years ago, western powers went out of their way to stop certain aspects of the program even though all evidence showed they were not making nuclear weapons.
Being open to real or perceived enemies can stave off armed conflicts. Leaving real or perceived threats to countries' wildest imaginations can be very destabilizing and dangerous. We talk about Iran from afar as if it is a monolithic bloc but if you really take a good look at the Iranians and honestly ask if you truly want to bomb and invade their country, you can lose the appetite rather quickly. In any armed conflict, it is the common people who tends to suffer the most. Haven't the U.S., Iran, Iraq, Afghanistan, Pakistan, etc. had enough already? Who speaks for the common people in these countries?
You failed to see the sarcasm in my comment?
I call the entire "justification" for bombing and invading Iran propaganda similar to what started the war with Iraq. Which we all know the war in Iraq was all based on a fraud thought up by the Bush administration and the M.I.C.
I do not support our country trying to be the world police and building an oil empire... we're following through on the great blunder of starting a land war in Asia. This kind of shit is what causes all these problems.
History shows it too.
CIA and Noriega
CIA and the Afghan Arabs and the Mujahideen
Gulf of Tonkin
US supported UN sanction on Iraq that killed over 500,000 children.
All the innocent lives lost from drone strikes.
Sadly the list goes on.
I know it was sarcasm but it nonetheless allowed me to ask some questions that people around the world can try to answer. Ultimately, people really have to free themselves, starting with their own minds, and joining other like-minded people in action. Waiting for others to come to their rescue is often very frustrating and may prove futile. Many countries seem to have the same problems so many horses browsing their own turfs in parallel can cut down the weeds much faster.
sometimes it is better to be in debt to your enemies than your friends. Your friends want to keep you well because they like you. Your enemies want to keep you well so they can get their money back. Just don't convince them that you can never pay it back. They might be angry.
think about what you are saying - would you rather owe 500k to some guy in china who could not collect if you decide not to pay or would you like it the other way around - he owes you the $ and you have no way to collect except to be very nice to him and hope he pays. they are in our pocket
I'd prefer that the government not be full of ass-clowns. Since when were we a country that needs foreign aid? Think about that.
I'd rather be the rich dude that can loan out a trillion and has so much money that i don't really care if it's paid back because I'm cool with just making a power move with collateral.
you made this comment -"Is it bad to be over a trillion dollars in debt to a country we supposedly have hostile relations with? - i tried to show that you have it backwards - i think i did but your comment makes no sense - go back to your original statement and start again -we have no debate about who is in congress so no need to repeat your ass clown remark
The government being full of ass-clowns doesn't make any sense to you? I assure you that there are many ass-clowns in the government. It's common knowledge.
Also the question in quotes is from the post, guy. It's not my question.
Who owns the US National Debt
http://tinyurl.com/4hmrhq3
I would like to see a breakdown of "U.S. Individuals and Institutions".
Also, I'm unsure if the various funds such as Social Security are of the same nature as other debts. We pay into Social Security. Ostensibly, that is a pool of money held in reserve. I wouldn't be the least bit surprised to learn that the money has been squandered.
You said you wouldn't be. Are you? What you probably won't find is what it would be worth if Congress hadn't spent it. I keep looking for it but haven't found it yet. If you do, I want to hear from you, OK?
Holders of T-Bills Treasury Bonds. Google it and you will find pie charts showing categories of folks holding the debt. Lots of it are US citizens and corporations. There is a lot of foreign ownership because people companies and foreign governments want a safe haven for their money. Our debt is considered to be safe, and liquid. The dollar is worth much more that it would be if it weren't considered a safe haven. Swiss francs are also considered to be a safe haven. Same story.
Yes, and many of those bill are not held directly but rather in pension funds, retirement funds, IRAs, mutual funds..
The dollar is not safe as it used to be. It is losing value all the time. The best thing to do is diversify. Hold some domestic stocks, global stocks, bonds, treasuries, gold, money market...
Said the broker. How did that diversification work out in the meltdown? Nothing is as safe as we used to think it was. And the correlation of every thing also proved to to be high. So low risk. low return lost as much as high risk, high return. So....
"What does China pay with? "
Lead painted baby toys, toxic sheet rock and toothpaste, fake pharmaceuticals, etc.
Absolutely but there are many other perfectly fine and cheap products, too. All of them have Chinese labor in them when they were made, even the toxic ones. The Chinese government seems incompetent in controlling product qualities. The Chinese people suffer from their very malicious merchant class, too. This should not diminish the U.S. resolve to push China hard to rectify these quality problems because we are CUSTOMERS and NOT Chinese. Yes, I sincerely wish that the Chinese people will NOT suffer from quality problems but they may NOT have as much clout as the U.S. because they are under their government's thumb. It is therefore incumbent for the U.S. to push China hard, even for the good of the Chinese people.
Better to stop being "customers".
It is up to our people, I guess. If we who can force the issue shirk our responsibility, our world will be worse off.
This man is not giving you an accurate account of fractional lending or the notion of "out of thin air."
http://www.infonomx.com/Business_and_Economics/Banking/ModernMoneyMechanics_Infonomics.pdf
After you read the above fractional lending discussion, then tell me and the forum what two things that this man is omitting for your understanding?
Just see how deep the rabbit hole goes ... http://occupywallst.org/forum/be-sure-to-spread-this-far-and-wide/#comment-587485
An old Chinese adage...
"Hold your friends close, but hold your enemies closer."
Think about it. The Chinese are very wise.
Wow, this is a fascination discussion. Thanks for the enlightenment.
Well, I'm more concerned with our declining manufacturing base, which really makes us more dependent on China. I mean, the other side of this coin is--it doesn't make much sense to lend money to an adversary. What if we decided to tell China, thanks for the two trillion, now go fuck yourself? I don't foresee this happening, but if it did, it would be China holding worthless debt, long after we had good times with their money.
In fact, the interest we're paying on treasuries is so low right now, I'm not sure why we're not eager to borrow more money from China.
China has our manufacturing base, and we have a pile of our own worthless Federal Reserve Notes. Hmmmmmm.
They have our manufacturing base (or more accurately, a fraction of it), but THEY have the pile of treasury notes (that they paid us for) :)
The last time I took a look around a government IT lab it said "made in China" on just about everything.
LOL ... indeed, we need trade reform. I'm all for China not being a poor giant totalitarian sweat shop, but I also don't want to lose our manufacturing base in the process. I think it's obvious, a modern society cannot be prosperous, if it doesn't produce anything.
We still make a pretty mean bomb! I don't recall where I saw this, but I recently watched a video which really lays bare the fallacy of war being good for our economy. The gist of the argument is that our labor and resources go into things that are useless to the general public.
See my answer below,
It can make very good sense to lend money to an adversary. If they attack their customer they don't get the loan repaid and they lose the interest. In general, attacking business partners, customers clients, or your bankers isn't a good idea and doesn't help your other trust based relationships..
We pay for the goods we buy from China with dollars, they use them to buy our bonds thereby loaning it back to us. We have a serious trade imbalance with China, we buy much more from them than they buy from us.
Money is created by the Fed, ideally when the economy requires it. Currently, the money supply is controlled more by politics than the economy. That's one of our problems. The new money is given to banks and put into circulation in the form of loans to companies and individuals. The Fed continues to own the money but the banks keep the interest paid on the loans.
When there is too much money in the economy the Fed begins to withdraw capital from the Federal Reserve banks thereby reducing the money supply. This system works well when men of character are in charge but with charlatans like Giethner and Bernanke are in charge, well, you can see the result.
OK so the Fed, a consortium of private banks creates money out of nothing and tells the government to print it (if paper is even used). That money is "given" to banks to put into circulation. Which banks get the money? Do they owe the Fed interest on the money? Are these the member banks of the Federal Reserve System?
Mostly the largest ones in the system (can also be Foreign). Yes, they pay interest. The Fed gives it's profit to the Treasury. Just transferred about $79 billion. Some are, some aren't.
I guess I need to return to reading their regulations. I started doing that a few years back, but got sidetracked when I found that they "trade in balances". I went looking for what that meant. I never returned to the original document.
There does appear to be a lot of bad information about the Fed in circulation. Of course, they don't make it easy to understand what they are really up to. Their power over the economy, operating beyond scrutiny and effective oversight is unacceptable.
Yeah, the theory was that secrecy would preserve their independence. Well, it did that. But everything eventually gets politicized, so we should always require transparency. Then make sure somebody reads the mail.
Some want to abolish the FED. I think they are wrong. When something gets screwed up, there is always someone who wants to throw it away instead of fix it. It is a good idea to buy their cast off cars. You can save a ton of money.
Seriously, you are on the right track. You can't depend on somebody else being your watchdog. You have to learn the system and check that it is working. I am old and will die one of these days and they won't tell you that your watch dog is gone, and the bad guys will steal the beer out of your fridg.
Honest politicians and good watch dogs are hard to find. Your Mom will be proud.
Do the names Silverstein, Lauder, Lowy, Kissinger, Greenberg, Bremer and Hauer mean anything to you? What was Geithner's first job out of college? Who introduced Evelyn de Rothschild to Lynn Forester? What cosmetic company does/or did Lynn Forester de Rothschild manage? What is the relationship between the Blackstone Group and 7 World Trade Center? Blackstone Group and AIG? Remember that penny ante AIG bailout that came before the real bailouts? Who took control of MMC after 9/11? What floors of 1 World Trade Center did Marsh USA occupy on 09/11/01?
Who killed John O'Neill? http://whokilledjohnoneill.com/ And why?
Who is Uzi Arad? Where was Heinz?
Tell me you aren't going to introduce me to something called a conspiracy? I'm pretty busy. I have to respond to this swell opportunity that a very nice fella from Nigeria happened to share with me.... And what really happened to the Cole? And what did the Glomar Explorer really find? Just because you are paranoid doesn't mean they aren't trying to get you.
Of course you may have inadvertently left out Benjamin Netanyahu Buzzy Krongard Mayo Shattuck III Jerome Hauer Maurice Sonnenberg Richard Bruce Cheney Michael Chertoff Don Radlauer Philip Zelikow John Deutch Paul Wolfowitz Richard N. Perle
But hey, that load of turnips outside don't belong to me. They're a rental.
Copy Lima Charlie.
I looked into this. They give most of their profit to the Treasury. Some of it goes to stockholders, which are all member institutions. Where the profit money goes from there is unclear.
It's called the General Fund.
A much better and detailed response than mine. Care to field the op's question to me below?
The chinese buy treasuries with dollars, it's a zero sum way to keep Dollar value up and won artificially low. If they didn't buy treasuries then they wouldn't have a place to park those dollars other than equities, which they also buy from time to time.
in other words, if you were china and I was usa, then if I continually bought from you and you bought nothing from me, over time my dollars would lose value.
but if I buy goods from you and you buy financial products from me, the ponzi scheme can run for quite sum time before my currency devalues.
But yes, eventually the bills come due.
China's currency is actually yuan or renminbi. Renminbi means "the people's money." China got nervous about its holdings of U.S. treasuries but the nervous financial markets around the world (especially in Europe) made their holdings more valuable. Yes, we got China pregnant but to China's delight the bastard turned out to be a real winner so far in the past year!
true
It's how we finance our trade imbalance with them. China needs the US market for their goods. It has fueled their economic growth
But what does it really mean? If the US government has borrowed a $trillion from China, how was it transferred? Are each of those dollars ones that went to China directly, or indirectly to pay for goods and services, or are they Chinese fiat currency expressed in dollars?
Unless a whole lot of people are wrong, all non-coin us currency in circulation was issued by the Fed and loaned to the US government at interest. If that is true, then the only way to pay off that debt completely is to issue more interest bearing currency and loan it to the government at interest.
D = P + I where P, the principle is the amount of currency in circulation, and I is the interest owed on that currency. So D is always more than P. That system is unsustainable.
But, on top of that, there is the interest owed on US Treasury Securities held by other entities such as other private banks and governments. There is more debt than there is money, and there will never be enough money to pay the debt.
val, it's not just to the gov't that they lend, but to the whole banking system.
That's how the system works, credit is created every time a loan is taken out. all loans are currency, all bonds are currency.
So the privately held Federal Reserve Banking System has the power to create money out of nothing and loan it to the rest of us at interest.
Anybody else who tries to use some kind of self-issued currency such as gold coins gets arrested.
http://www.fbi.gov/news/stories/2011/april/dollar_040511/dollar_040511
"Money doesn’t grow on trees. It also can’t be printed or minted by private citizens—as four co-conspirators in North Carolina and Indiana recently learned the hard way."
Wow! Them Fed folks gotta helofa gig! And the point stands. There will always be more debt than there is money to pay it off. That sounds like a Ponzi scheme of some kind!
well, it's a function of making a loan so either private banks create all currency, or if gov't does, then they would also need to make all loans, our system is a hybrid of both
It's not perfect, but it's what we got
So every dollar in circulation is owned by private corporations and is earning interest for the corporations. Collecting interest is not necessarily a function of making a loan. It seems especially egregious to loan fiat money at interest.
Damn! Then there's all those trillions of dollars of bailout money. Where did that come from?
This is like playing monopoly with the rules changed so that the banker can create money out of nothing and loan it out at interest to the other players. I can guess who will win in that scenario.
No, that's ok, let me explain again, a little better hopefully
when a bank makes a loan, that loan is a new asset that didn't previously exist. it's an extension in credit with the money they hand you when they make that loan.
and yes, the trillions in bailouts were made from nothing, but was no inflationary because currency was destroyed when those loans went bust
Now you seem to be talking about fractional reserve lending. So the Fed doesn't ever loan the money they create? They just loan "against" it?
Let's see, the Fed creates money out of nothing and it goes on some banks' books. These are the member banks of the Fed, right?
Then how does this money get into circulation? If all new loans are "new assets" created out of nothing, then it seems like the original fiat money never gets put into circulation. So not only do they create money out of nothing and issue it as US currency, they then loan against it some multiple number of times, determined by the reserve requirement.
And what do you mean "those loans went bust". BS Bernanke said they were all paid back in full.
the loans are how the money goes out into circulation
when you take out a loan from a bank, or more apt, when a non fed bank borrows from the fed, it's the loan that is the asset, the money is a representation of that loan, that's why they are bank notes
The loans I was talking about were the mortgage loans, and their representative bonds, when a home loan goes bust, the asset that represents the unpaid loan=currency that is destroyed
What bernake was talking about was the loan to the banks that's all. but those loans were created currency which amounted to the dollar number of loans that went bust
otherwise we would've had deflation, with all that currency destruction
But before you ask, yes they could have paid off the mortgage loans instead with the newly created currency, and the reason they didn't was criminal
I'm sorry. I thought you were talking about the assets of the lender, not the borrower.
So the too big to fail banks held a bunch of debt that would not be repaid by the borrowers. The Fed created money and injected it into those banks in the amount of these bad debts. How did the member banks pay the Fed back? In the form of money or in the form of collateral property?
If it was money, how did they get the money? If it was property, then the Fed must own a whole lot of property they will have a hard time recouping the value paid for it.
So the upshot is, where is the money now. And where is the property?
The Fed does not charge the government interest. Please see my response above.
Oh, I see, the Fed does charge the government interest on the money they transfer to the government when buying Treasury securities. Right?
http://www.federalreserve.gov/releases/h41/current/
Now you're beginning to get a glimmer of the insanity of our current fiscal policy. We are treated to the spectacle of the Fed buying bonds based on money it created with more money it created. Never in our history has this happened.
The traditional way governments get out from under crushing debt is to inflate their way out. We are paying back 100 cent dollars that we borrowed years ago with 45 cent dollars today. The massive money supply increases QE1, QE2 and potentially QE3 we have experienced are how the Fed is keeping inflation under control. If Obama stands a chance of reelection the inflation rate must be kept under control until after the election.
We are living in a dream world filled with cheap dollars but even the people on the street are getting nervous, they see the end coming and things like OWS are the response.
It's just sad you are so misdirected in your blame.
I don't know that I am misdirected in my blame. Do you even know whom I believe to be ultimately responsible for this staged debacle? Who owns the Federal Reserve Banks? These are private corporations. Or, more to the point, who owns the member banks which own the Fed?
And ownership isn't everything. Who controls them is at least as important.
I hate to say Quantitative Easing sounds like something that happens to a prisoner when he drops the soap in the shower.
Do the names Rockefeller and Rothschild have any relevance here?
Gog and Magog.
Oh shit! Here we go again!
http://www.skullandcrossbones.org/articles/skullandbones.htm
"New members of Skull and Bones are assigned secret names, by which fellow Bonesmen will forever know them. Some Bonesmen receive traditional names, denoting function or existential status; others are the chosen beneficiaries of names that their Bones predecessors wish to pass on. The leftover initiates choose their own names. The name Long Devil is assigned to the tallest member; Boaz (short for Beelzebub) goes to any member who is a varsity football captain. Many of the chosen names are drawn from literature (Hamlet, Uncle Remus), from religion, and from myth. The banker Lewis Lapham passed on his name, Sancho Panza, to the political adviser Tex McCrary. Averell Harriman was Thor, Henry Luce was Baal, McGeorge Bundy was Odin. The name Magog is traditionally assigned to the incoming Bonesman deemed to have had the most sexual experience, and Gog goes to the new member with the least sexual experience. William Howard Taft and Robert Taft were Magogs. So, interestingly, was George Bush. "
You coulda saved yourself a lot of typing if you had just indicted the evil R's.
But I appreciated your well written explanations.!
They pay with the dollars they earn from exports.
[Removed]
I think you should really understand the whole thing better before blaming bankers. As for China, well I think it was part of their strategy to be 'joined at the hip' with the US so that the govt thinks twice before taking any action against chinese interests.
I understand enough to know that we have a shadow government controlled by a super-wealthy cabal of nefarious actors. Among their deeds was the terrorism of 9/11/01. Of that, I have no doubt. I also know that the people running the top banks are connected to the people responsible for 9/11/01, and may, in some cases be one-in-the-same.
Why are many of the top people involved in national intelligence and "counter" terrorism banksters on sabbatical?
whoa... looks like u know a LOT... i bow to u... rofl..lol
Coincidence can reach a point at which it belies itself as intent.
http://vehme.blogspot.com/2007/12/port-authority-agreement-to-privatize.html
Who killed John O'Neill? And why?
hmmmm
[Removed]