March 19, 2015 By Terence P. Jeffrey
(CNSNews.com) – The Japanese, who increased their holdings of U.S. government debt from $1,201,400,000,000 to $1,238,600,000,000 in the year between January 2014 and January 2015, are poised to surpass the Mainland Chinese as the top foreign owners of U.S. government debt.
In contrast to the Japanese, the Mainland Chinese decreased their holdings of U.S. government debt from $1,275,600,000,000 to $1,239,100,000,000 during the same period, according to data released by the U.S. Treasury this week.
That leaves the Chinese and the Japanese neck-to-neck in their ownership of U.S. debt–$1.2391 trillion to $1.2386 trillion–with the Japanese on a generally upward trend in their holdings and the Chinese on a generally downward trend.
Chinese and Japanese Holdings of U.S. Government Debt
From March 2000 (which is the earliest date for which the Treasury’s website has published historical data on foreign-owned debt) through August 2008, entities in Japan owned more U.S. government debt than entities in Mainland China. In September 2008, entities in Mainland China surpassed entities in Japan in ownership of U.S. debt and since then (through the latest published data, which for this January), the Chinese have been the top foreign owners of U.S. government debt.
Yet, thus far, the peak for Mainland Chinese holdings of U.S. debt was in November 2013, when Mainland Chinese holdings hit $1,316,700,000,000. Since then, Mainland Chinese ownership of U.S. debt has trended generally downward, while Japanese holdings have trended generally upward. (Entities in Hong Kong, which the Treasury accounts separately from entities in Mainland China, also held $172 billion in U.S. government debt as of the end of January.)
As the U.S. government massively increased its debt over that past fifteen years, the Federal Reserve and foreign entities—including the governments of China and Japan—have purchased unprecedented quantities of U.S. Treasury securities.
In recent years, the Treasury has been able to sell these securities at relatively low interest rates. Thus, the Treasury has been able to keep the interest paid on the publicly held portion of the debt relatively low.
Top 15 Foreign Holders of U.S. Government Debt
In January 2001, for example, entities in Mainland China owned only $61.5 billion in U.S. government debt and entities in Japan owned only $312.5 billion—for a combined $374 billion in U.S. debt owned by China and Japan. But in January 2001, the average interest rate paid on the marketable debt of the U.S. government was 6.620 percent, according to the Treasury.
By January 2015, the $1.2386 trillion owned by the Japanese and the $1.2391 owned by the Chinese equaled a combined total of $2.4777 trillion. But in January 2015, that average interest rate on the U.S. government’s marketable debt was only 2.029 percent—less than one-third what it was the month that George W. Bush took office.
Also back at the end of January 2001, according to its weekly balance sheet, the Federal Reserve owned $518.441 billion in U.S. government securities. Eight years later, at the end of January 2009, the Federal Reserve still owned only $475.129 billion in U.S. Treasury securities. But by January 2010, the Fed owned 776.595 billion in U.S. Treasury securities; and, by the end of January 2015, it owned $2.4608 trillion.
In total, according to data the Treasury released this week, foreign entities owned $6.2179 trillion in U.S. debt as of the end of January. Of that, $4.1243 trillion was owned by “foreign official institutions”—that is, foreign government-controlled institutions.
The $6.3675 trillion in U.S. debt owned that foreign-government institutions and the Federal Reserve owned combined as of the end of January equaled 49 percent of all the publicly held debt issued by the United States up to that point. The $8.4622 trillion in U.S. debt owned by all foreign entities and the Federal Reserve combined as of the end of January equaled 65 percent of all the publicly held debt issued by the United States up to that point.
In addition to the money the Treasury has borrowed publicly—from sources including China and Japan—it has also borrowed money from government trust funds (such as the Social Security trust funds). The Treasury calls this debt “intragovernmental debt.”
Over time, however, the share of the federal debt held by the public has been increasing as the share held in “intragovernmental debt” has shrunk. As the Baby Boom continues to retire and collect Social Security benefits, the share of the debt that is “intragovernmental” will continue to shrink, and the share on which the Treasury must pay interest to public debtholders will increase.
At the end of January 2001, the total debt of the U.S. government was $5,716,071,000,000. Of that, $3,388,016,000,000—or 59.3 percent—was held by the public; and $2,328,055,000,000—or 40.7 percent—was “intragovernmental debt.”
By the end of January 2015, the total debt of the U.S. government had grown to $18,082,294,000,000. Of that debt, $12,984,930,000—or 71.8 percent—was held by the public, and $5,097,364,000,000—or 28.2 percent—was “intragovernmental debt.”
In a paper published last week—“China-U.S. Trade Issues”—the Congressional Research Service said: “China’s purchases of U.S. government debt help keep U.S. interest rates low.”
“However,” said this CRS report, “over the past few years, Chinese officials have expressed concern over the ‘safety’ of their large holdings of U.S. debt. They worry that growing U.S. government debt and expansive monetary policies will eventually spark inflation in the United States, resulting in a sharp depreciation of the dollar. This would diminish the value of China’s dollar asset holdings. Some Chinese officials have called for replacing the dollar as the world’s major reserve currency with some other currency arrangement, such as through the International Monetary Fund’s special drawing rights system, although many economists question whether this would be a feasible alternative in the short run.”
“Some analysts have raised concerns that China’s large holdings of U.S. debt securities could give China leverage over U.S. foreign policy, including trade policy,” said the CRS report. “They argue, for example, that China might attempt to sell (or threaten to sell) a large share of its U.S. debt securities as punishment over a policy dispute, which could damage the U.S. economy.”
“Others counter that China’s holdings of U.S. debt give it very little practical leverage over the United States,” said the CRS report. “They argue that, given China’s economic dependency on a stable and growing U.S. economy, and its substantial holdings of U.S. securities, any attempt to try to sell a large share of those holdings would likely damage both the U.S. and Chinese economies. Such a move could also cause the U.S. dollar to sharply depreciate against global currencies, which could reduce the value of China’s remaining holdings of U.S. dollar assets.”
In its long-term budget outlook published last July, the Congressional Budget Office asked: “What Consequences Would a Large and Growing Federal Debt Have?”
“How long the nation could sustain such growth in federal debt is impossible to predict with any confidence,” said CBO. “At some point, investors would begin to doubt the government’s willingness or ability to pay its debt obligations, which would require the government to pay much higher interest costs to borrow money. Such a fiscal crisis would present policymakers with extremely difficult choices and would probably have a substantial negative impact on the country. Even before that point was reached, the high and rising amount of federal debt that CBO projects under the extended baseline would have significant negative consequences for both the economy and the federal budget.”
In its latest budget outlook, published in January, the CBO said “the federal government is projected to borrow another $8.8 trillion from 2015 through 2025.”
http://cnsnews.com/news/article/terence-p-jeffrey/china-s-holdings-us-government-debt-have-declined-2013
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War and chaos ahead: How mega-rich are preparing
Exclusive: Barrett Moore previews West’s ‘impending implosion of the empire of debt’
March 21, 2015 by Barrett Moore
Candidly, I don’t have the time right now to be writing an article that most in the West would ignore or repudiate. I wrote this piece, however, for the staff of WND with whom I have consulted over the years. WND is one of the few news organizations in America that is interested in truth, and unconcerned with the consequences of reporting it. I admire that, and so should you. Few news organizations remain that are not just inundating us with misinformation and propaganda. But I digress.
We are at the precipice of war, and this is a call to action. While it might not come tomorrow, the threat does grow by the day as conflict between the largest and most powerful nation states becomes inevitable, driven by the impending implosion of the empire of debt accumulated by Western democracies, and by the yearning of Russia and China (and their surrogates) to escape the constraints of almost 70 years of American hegemony.
I am not talking about another one-sided skirmish in the desert, but rather a real war, where satellites fall from the sky, ships sink, supply chains are disrupted and there is a loss of life not seen since the last century; a war of such a magnitude that few Westerners alive today can comprehend it. Such a war will alter the world as we know it. And, reading the tea leaves, it seems there is little we could do now to stop it. At this stage, all that is missing is the spark that ignites the inferno. It might come tomorrow, it might delay a while longer. We can prepare, but preparation takes years and years, and requires a threshold level of certainty that the threat exists, that it merits attention, that it demands action.
Why do our kids’ novels and movies (“Hunger Games,” “Divergent”) assume a game-changing war, but writers and talking heads on our mainstream news sites and channels serve up mindless banter about the Kardashians, the climate, Twitter trends and gender engineering? Even thinking Americans have traded serious conversation about geopolitics for Facebook page updates, thereby providing every intelligence organization on the planet the opportunity to further profile them. We are sinking further and further into blind ignorance about how the world really works, even as we strengthen the powers threatening us.
Are you still with me? Then read on. You need to reprioritize your life today and start fulfilling the most important obligation you have to your family aside from serving God. It’s not your next vacation, a new car, or a club membership that I am talking about. No. It is the need to protect and provide for your family in a conflict situation where the supply chain no longer works. Do you think your wealth will protect you? Or that ready access to modern aircraft will make a difference? Or maybe you are fortunate enough to own a second home, or even a boat? I am sorry to say that these luxuries will prove all but useless when the coming storm arrives.
If you question my advice, then tell me, why did Mr. Jamie Dimon buy an island? Or why does Hank Paulson actually live on one? Or what about James Cameron, who up and moved to New Zealand? Or the thousands of bankers and hedge fund managers that have sought safety in havens throughout the Caribbean, and in Central and South America? Oh, you didn’t know about that? Or maybe you are having trouble placing those names? Well, Mr. Dimon is the current chairman and CEO of J.P. Morgan/Chase Bank. Mr. Paulson was the chairman of Goldman Sachs, before becoming the U.S. secretary of the Treasury. And Mr. Cameron is the director and creative genius behind the movie “Avatar,” among others – which made him a billion dollars or so. But don’t be envious. Based on my experience building havens, Mr. Dimon and Mr. Cameron overlooked some serious geopolitical threats during their haven selection process, and this is despite their huge resources, connections and intuition about where the world is going. In my opinion, Mr. Paulson made a wiser choice to stay in North America, and so have hundreds of others.
Let me explain further. You see, each of these very smart and successful people understands that the political leadership of our nation, irrespective of party affiliation, are as much in denial regarding the threats we face as they are wholly unprepared and ill-equipped to make the hard financial decisions that are essential to preserving our way of life. They recognize that we are steaming right along, business as usual, such that virtually every governmental action is partisan and is made without restraint or consequence, and that the population remains blissfully ignorant as to how this inability to change direction tightens the proverbial financial noose around our necks. Think about it – how many times have you heard a politician or member of the media comment about the size of our national debt and how our path is unsustainable? Yet nothing changes.
While it sounds like a joke, ask yourself, what is the difference financially between Greece and the United States? In many ways, very little. Both nations are broke, both are living well beyond their means, and both are hobbled by politicians incapable of making the hard (i.e., right) decision for their citizens. Think about the news lately. If it were not for the Federal Reserve and the ability of the U.S. Treasury to borrow with impunity, our leadership would be begging for loans from creditors, much like Greece is begging its EU creditors (read: Germany), for additional financial help.
In short, our leadership won’t change the trajectory we are on until they are forced to do so. Don’t listen to what they say, but observe what they do. For example, the Reagan, Bush (41), Clinton, Bush (43) and Obama administrations have each saddled the nation with successively larger and now record amounts of debt (and please, don’t give me any nonsense about Clinton not adding to the debt; he was just a little more clever about trying to market the narrative). We have all seen these numbers before, but, to refresh your memory, they are as follows (approximately):
– $18 trillion is the current cumulative budget deficit of the United States;
– $2 trillion is the approximate current annual increase in the U.S. budget deficit, if one looks beyond the published numbers and accounts for all federal expenditures;
– $200 trillion is a reasonable estimate of the U.S.’ additional unfunded liabilities for existing social programs;
– $16.8 trillion is the United States’ current GDP;
– $3.1 trillion is the total tax revenue the federal government derived in 2014.
Think about the implications. The federal government is spending $5-$5.5 trillion annually (using GAAP-adjusted accounting) yet taking in approximately $3.1 trillion in annual revenues. We are thus only paying for, roughly, 60 percent of expenditures; the rest is being borrowed. How would that go over in your household?
Yawn, you say, I have heard all this before and we are still here – what makes it different this time? Answer: The Federal Reserve has, in the last year, begun to monetize our national debt, which means we are buying our own debt back with borrowed (or newly created) dollars. So what? Well, this is the sign that sophisticated financial insiders have looked for as the beginning-of-the-end, and this is why they are preparing to flee their metropolitan bases of operation.
Bear with me while I explain: The insiders understand that the monetization of our debt will eventually drive an increase in interest rates, which will in turn increase the cost of the nation’s borrowing (think of it as an increase in the rate on your credit card), thus creating the need to spend more money to pay the increased interest cost to service the national debt, which increases the budget deficit, that in turn increases the need to borrow more money and monetize even more debt, eventually creating a self-fulfilling prophecy of increasing interest rates to attract more and more capital, which in turn increases the cost of servicing the underlying debt etc. etc.; eventually hastening the coming financial collapse insiders fear. Furthermore, they know the Federal Reserve’s current and careful balancing act is susceptible to an upset due to some black swan event that triggers a global financial panic, thereby ripping the legs out from under the debt-supported Western democracies with the United States at the hub of that collapsing wheel. What does this mean? No one is quite sure, but analysts predict a forced bank holiday, (i.e., the banks, including ATMS, close for some indefinite period of time), massive employment layoffs, disruptions of the usual supply chain (i.e., of truck and rail transportation of food, medicine and other staples), non-payment of pensions and social assistance programs (welfare) and the destruction of much of the nation’s paper-based wealth (i.e., your stock portfolio, among other assets), along with the emergence of broad social upheaval to include gangs, mobs, riots and other social disruptions. Remember that following the financial crisis in 2008, Mr. Paulson, as U.S. Treasury secretary, stated that at the time of the $700 billion bailout from the Federal Reserve, we were within 24 hours of the collapse of the global economy. If this information does not create a pit in your stomach, then perhaps this story will.
While you were preparing to celebrate this past Christmas with your family, in mid-December 2014, hidden away on page 615 of a 1,603-page Continuing Resolution that was passed by Congress and signed by the president, there was a little-known provision that put the American taxpayer on the hook for derivative trading loses by major trading banks. What? Really? What does that mean? Well, our illustrious leaders thought it appropriate for the American taxpayer to guarantee any derivative trading loses the banks suffer, through subsidiaries that are insured by the Federal Deposit Insurance Corp. In other words, the banks can continue to write, sell, and trade these sophisticated financial instruments, and profit from them, and, if they become financially untenable (read: BAD), walk away from them and let the American taxpayer wear the liability. Oh yes, I forgot to tell you the best part: These same banks currently have over $303 trillion of these financial instruments (derivatives) on their books.
Going just a bit deeper, remember (what my fourth-grader knows) that a trillion dollars is a thousand-billion dollars. Further, in 2014, the value of ALL the economic activity in the world, commonly referred to as the global domestic product, or GDP, was $72.6 trillion. So, yes, the guys on Wall Street figured out how to stick the federal government (read: you, the American taxpayer) with a potential further liability of $303 trillion, representing over four times the world’s entire GDP. And you wonder why Jamie Dimon bought an island?
I remind you of the adage of MI-5, the British Internal Security service: Western civilization is only four meals away from anarchy.
People like Dimon, Paulson and thousands of other members of the banking and financial communities recognize that during the financial crisis of 2008, our leadership did not make the hard decisions necessary to fix the system, but merely applied a $700 billion Band-Aid. By kicking the proverbial can down the path, they simply delayed and laid the groundwork for an even larger and broader crisis in the future. Hence the reason that so many have established havens where they can ride out the coming financial tsunami that will envelop the world; while others have killed themselves, with some 60 odd bankers/financiers dying either by their own hand or under mysterious circumstances in the last couple years.
So this is the lens through which many in the financial and banking industry look. They know the system is untenable, yet they know they have been provided a once-in-a-generation opportunity to legally make obscene sums of money. (Note: Many won’t admit this fact; they just think they are (were) much smarter than everyone else.) Yet they know that it is mathematically and financially impossible for the United States, much less all the other Western democracies, to repay the mountains and mountains of debt they have borrowed to finance our lifestyles. They have resigned themselves that a collapse is inevitable. They don’t yet know the date, the time, or the ferocity of that collapse, but they intend to use their wealth to insulate themselves as best they can, e.g., by buying an island in the South Pacific, stocking it well and hiring a bunch of Navy SEALs for protection.
What I believe most people overlook is that politicians will always be politicians, and there is no way they will ever allow themselves to be blamed for the excesses of the last 30-odd years. Think about it. If a collapse were to take place, the politicians would need to hide from the citizens who lose everything. Literally. What would you do if, in a matter of days, you lost almost everything you had worked for during your entire life, including your pension, IRA, Social Security benefits, insurance benefits, etc.?
Interestingly, the government has done much to protect itself. Or might I rephrase that statement to say that our government leaders have done a great deal to protect themselves and their families. Over the course of the last two decades alone, the federal government spent hundreds of billions of dollars designing, building and refining an elaborate Continuity of Government Plan (COG) that consists of over 100 classified facilities designed to protect the leadership of the nation during crisis – any crisis, of any magnitude and any duration.
Oh, you say, you have not received the briefing necessary, nor been issued the credentials by FEMA or DOD, to access one of these facilities? Well, don’t feel bad, you are in the same situation as most Americans … unprepared and suffering from Normalcy Bias. All the while the Russians have built the most formidable offensive (nuclear) rocket force in the history of mankind and have increased their investments in their impenetrable Yamantau mountain complex that is rumored to be over 400 square miles in size. (Yes, miles). The Chinese have made similar investments in offensive nuclear capability, including the construction of 3,000 miles of underground tunnels to protect their populace. In the meantime, and particularly under the current administration, the United States accelerates its voluntary disarmament.
So where am I going with this? Where we started, or should I say, where it ends. War. Unfortunately, this is the only way that no one group can be held accountable for decades of poor decision making and the financial calamity that is upon us. Whether they be bankers, politicians, or their advisers, they are all culpable. They are, however, way too connected and way too smart to take any blame for the coming financial collapse.
Other players are emerging on the world stage who have their own agenda and will likely facilitate, or at the very least, take advantage of, the financial crisis that looms over the West. Most Americans are ill-equipped to recognize such threats, much less foresee their logical outcome. In follow-on articles, I hope to explore specific geopolitical threats the United States faces and why our cultural blinders prevent us from acknowledging or preparing for them.
“The Dead Man’s Curve” is an expression used by helicopter pilots to describe a particular flight profile where the aircraft is flown so low and slow that, if the engine were to quit, the pilot would surely die, as there would be insufficient altitude to complete an autorotation.
Due to the monetary house-of-cards outlined here, and the confluence of growing geopolitical threats, political impotence and pressing cultural change, the United States and most other Western democracies are operating well within “The Deadman’s Curve.”
You have been warned. Recalibrate your mindset. Now prepare.
http://www.wnd.com/2015/03/war-and-chaos-are-coming-how-mega-rich-are-preparing/
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