Originally posted by questioningall
Now that situation is changing. The red line has a slight negative trend, meaning the rate of acquisition of U.S. debt by foreign institutions is slowing. At the same time, the blue line is developing a positive slope. That means Federal Reserve is now buying, or monetizing, U.S. government debt. The situation may change dramatically if the “Buy American” requirement angers foreign governments, causing them to buy less U.S. debt. Remember, the money they use to buy U.S. debt comes from trade.
above from link:www.kitco.com...
The money don't come just from trade -- that's just less than one third of the source. If a foreign country purchases large amount of US Treasuries by paying with money from the trade means that a trade deficit exists between that foreign country and the USA. In case of the trade balance between China and the USA, the USA was running a $256.1 billion trade deficit in 2007.
www.epi.org...
But in November 2008, China held $681.9 billion worth of US Treasuries.
www.treas.gov...
There is no way that the trade deficit would increase by some $400 billion within one year when it increased from 2006 to 2007 by only $23.7 billion.
Buying US Treasuries means buying USD to make the purchase and that helps to keep the US currency in demand.
