When
the U.S. has a trade deficit, that is, it buys more from overseas
than it sells, it has to settle accounts. Foreigners don’t eat our
dollars, but they can buy U.S. Treasury bonds with them. Fortunately,
they have taken them though the bonds are not necessarily an investment
bargain.
Foreign central banks now own about one-third of Treasury bonds. Only about one-quarter is held by individuals and investing institutions. Much will be employed in the future as margin backing for trading derivatives under new regulatory law.
Unfortunately, those bonds pay very little and keep losing purchasing power. Our problem is, there may be a time when foreigners no longer will accept what is referred to as dollar convertibility, or world recognition as a standard of value.
What keeps it whole? The Euro is in far worse trouble and the Chinese yuan needs some time in its steady growth. (See the Earl J. Weinreb NewsHole® comments.)
Foreign central banks now own about one-third of Treasury bonds. Only about one-quarter is held by individuals and investing institutions. Much will be employed in the future as margin backing for trading derivatives under new regulatory law.
Unfortunately, those bonds pay very little and keep losing purchasing power. Our problem is, there may be a time when foreigners no longer will accept what is referred to as dollar convertibility, or world recognition as a standard of value.
What keeps it whole? The Euro is in far worse trouble and the Chinese yuan needs some time in its steady growth. (See the Earl J. Weinreb NewsHole® comments.)
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