from Follow the Money

The Washington Post is also sounding the alarm …

October 20, 2004

Blog Post
Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.

More on:

Financial Markets

A friend brought this Washington Post article to my attention, as it takes on the topic of my last post. Like the FT article it draws on the the new Treasury data on foreign purchases of US securities to highlight the United States’ dependence on foreigners, and specifically, foreign central banks, to fund our budget deficit.

One point is worth reinforcing. The debate about whether Asian central banks will dump their existing holdings of Treasuries misses much of the point. Asian central banks don’t have to sell their existing Treasuries for the dollar to come under pressure; all they have to do is to stop buying new Treasuries. In order for the dollar to stay at its current levels, Asian and other central banks have to increase their holdings of dollar-denominated assets by at least $200 billion a year, probably more. If they don’t add to their holdings of Treasuries, the dollar will fall.

More on:

Financial Markets

Up
Close