The US government is becoming increasingly dependent on foreigners to finance its growing deficit. Currently, foreign investors hold over $3.3 trillion of US government bonds, representing about 30 percent of the outstanding stock.
As of March 31, 2009, the US government debt stock stood at $11.1 trillion. Over the last 12 months, it has increased by $1.7 trillion.Of course, this can not continue for ever. At some point, foreign investors are going to wake up and realize that US fiscal policy is unsustainable. When that happens, there will be a run on US treasuries. When it happens, it will make the recent financial crisis look like a garden tea party.
3 comments:
The US economy is being run by clowns. Foreigners are in control and the ones that get out first in the coming months will have the last laugh.
how much of that is foreign central banks? I suspect they see their purchases as writeoffs, and a way to stimulate their own countries' exports. Every central bank out there seems to be determined to debase the currency they issue. Your point still holds, though: U.S. imports are flagging too, with no end in sight. Soon there will be no rationale for anyone except the Fed to buy treasuries.
The big question is how much of UK debt is owed to foreigners?
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