Friday, October 16, 2015

Has the Flight From the US Dollar and Treasury Securities Begun?

It is suspected that Belgium has been acting as a front for China by buying and selling of US Treasury securities for the country.

Smaulgld reports:
China [directly] added $1.7 billion in U.S. Treasuries in August. However, Belgium, often considered a proxy for China,sold $44.8 billion, while Russia added $7.8 billion. The grand total of foreign holdings of US Treasuries fell $17.8 billion from $6.116 trillion in July to $6.098 trillion in August.

China has a lot more Treasury securities they can sell. They remain the largest holder of foreign Treasury securities,

However, as Smaulgld points out:
The most significant change in foreign holdings of U.S Treasuries is the dramatic increase and subsequent decrease in Belgium’s holdings over the past two years. Belgium held $188 billion of T Bonds in March 2013, $200 billion in November 2013, $257 billion in December of 2013 and $348 billion by October of 2014.

In January 2015, Belgium boosted their U.S. Treasury holdings to $354.6 billion. In February 2015 Belgium reduced their holdings to $354.3 billion. In April 2015, Belgium continued to shed its US Treasury holdings to $228 billion falling from third largest foreign holder to sixth.

In July Belgium dumped $52.3 billion in U.S. Treasuries after shedding $26.1 billion of U.S. Treasury Bonds in May bringing their total to $155.4 billion and placing them as the ninth largest foreign holder of U.S. Treasuries.

In August 2015 Belgian selling of U.S. Treasuries continued. Belgium shed $44.8 billion U.S. Treasuries in August putting their total at $110.7 billion and in 14th place among foreign holders of U.S. Treasuries.

Has the flight from the dollar and Treasury securities begun?

Smaulgld suspects so:

The movement away from the dollar appears to have begun. As recently as May 2013, the percentage of foreign exchange transactions conducted in dollars was 80% and the percentage of overseas reserves held in dollars was 60%. As countries sign more non dollar deals among themselves and diversify their reserves, these percentages will certainly fall...

The United States has enjoyed a high standard of living partially because it can fund its deficit spending via the sale of T-Bonds to foreigners or through the printing of money via the Federal Reserve’s QE programs. If the demand for dollars is reduced as the Fed tapers and ends QE and countries use currencies other than the dollar in international trade and reduce their dollar reserves, the value of the dollar will decline making imports to the U.S. more expensive and causing price inflation in the United States.



  1. Phase one of the Great Ponzi ends, and phase two begins, in which the Fed will monetize all debt returning from phase one, the antecedent phase wherein the USG exported massive USD inflation to its foreign trading partners.

    Who's to say how or when this scheme will fail?

    Japan's CB has been monetizing debt rather overtly for some time now, and the country seems to have achieved a numbingly comfortable, paralytic stasis. Mrs. Watanabe isn't overjoyed, but her ruling class at least is satisfied.

    CBs are proficient in all the cheap accounting tricks that get real people locked up, and the financialization they have created with their general ledger mischief has nothing to do with true economic activity; financialization, rather, slowly sucks the life out of free markets, which are the only source and cause of general prosperity.

    Unfortunately, for as long as the money commodity is controlled by the statist monopoly, the financialists, corporatists, cronies, technocrats, bureaucrats, military-industrialists, and political overlords will continue to prosper personally even within a moribund, ossified economy -- to do so all they need only increase the rate of their plunder of the diminishing returns (thereby making sure that your share, the producer's, is less). Slow burn, baby; slow burn. This sh*t ain't your great-grandfather's Austrian Business Cycle.