some time ago he said 'the chinese control half trillion in US treasury securities, thats about one day's volume of the US treasury market so its not that significant'. hes probably right
Hank Paulson ? I would put him on the same level as Barney Frank. If you believe these guys can solve our problems...then I've got a bridge to sell you...
The "float" in US Treasury bills, notes and bonds is just under 4.4 trillion dollars. The Chinese hold almost ten percent of that, $414 billion. If Paulson thinks the Chinese could dump ten percent of the publicly held debt on the open market without serious repercussions, he's nuts. Martin
Agree, he's just spouting BS. 10% of the float being sold would definitely result in a bit of a spike in long-term rates. Whether it is 0.1% or 1.0% is the issue, along with whether the spike lasts or rapidly disappears. Personally I think it would have a reasonable but not massive short-term effect, and over the long-term would have no market effect whatsoever.
You're absolutely correct. The threat of U.S. trade sanctions against China trumps the effects of Chinese flight from dollar denominated assets. In other words China feeds off America and not visa versa. In the early 80's the incessant talk was of Arabs supporting U.S. markets with Petro-Dollars, then in the late 80's it was the Japanese and now it's the Chinese. Yawn.....
Here's monthly statistics for foreign holdings of US Treasuries: http://www.ustreas.gov/tic/mfh.txt Interestingly, it looks like most of the foreign buying in the last year has been done by the UK. In the last few months, China's actually been trimming their holdings. 12 month change in holdings, in billions: Japan: -2.4 China: 32.8 UK: 134.6 OPEC: 11.5 Brazil: 60.3 Martin