Everyone was once worried at the prospect of someone sneaking a suitcase nuke into the US. Yet this week a suitcase full of an equally explosive story cross the wires, though it was largely ignored.
A pair of unsettling stories appeared in the bitstream in the last day, one talking about the Japanese quietly attempting to offload about 25% of their US Treasury bond debt holdings, and then this headline: "Italy Seizes $135 Billion in US Treasury Certificates." Asia Times reported: "Italy’s financial police (Guardia italiana di Finanza) has seized US bonds worth US $134.5 billion from two Japanese nationals at Chiasso (40 km from Milan) on the border between Italy and Switzerland." The bonds were secreted in a simple travel suitcase, heading for Switzerland, the land of secret bank safety deposit boxes.
The story was unclear as to what was up with this seizure and speculated it was either a surreptitious attempt by the Japanese to dump bonds, or perhaps a massive counterfeiting operation. In any case, the story hints at the growing discomfort of foreign sovereign governments holding US Treasury Debt, particularly China ($770 Billion) and Japan ($686 billion). Treasury bond prices have continued to slip in spite of the Fed's effort to bolster this market by simply printing money and buying T-Bills. As prices slip, so do the value of these foreign holdings, and the value of the dollar itself. It should be no mystery that China and Japan want to divest themselves of some of this debt. It's the cloak & dagger secrecy of it that I find curious, and also the fact that the US media largely ignored the story. (I suppose that should come as no surprise).
The root of this tooth is the ominous prospect of a default should these bond markets collapse. Since the once "almighty dollar" is really backed by nothing more than confidence in the US, what happens if the massive debt load simply becomes unmanageable? And isn't it now astounding to think that if nations like Japan and China do not continue to buy our debt the US would be in grave peril? Treasury Secretary Geithner's recent trip to try and assure the Chinese their assets are safe may have also been a cheer leading campaign to bolster the faltering bond markets. He was practically laughed off the stage by Chinese university students.
Is the US becoming a laughingstock of the world because of our massive and unsustainable debt?
A pair of unsettling stories appeared in the bitstream in the last day, one talking about the Japanese quietly attempting to offload about 25% of their US Treasury bond debt holdings, and then this headline: "Italy Seizes $135 Billion in US Treasury Certificates." Asia Times reported: "Italy’s financial police (Guardia italiana di Finanza) has seized US bonds worth US $134.5 billion from two Japanese nationals at Chiasso (40 km from Milan) on the border between Italy and Switzerland." The bonds were secreted in a simple travel suitcase, heading for Switzerland, the land of secret bank safety deposit boxes.
The story was unclear as to what was up with this seizure and speculated it was either a surreptitious attempt by the Japanese to dump bonds, or perhaps a massive counterfeiting operation. In any case, the story hints at the growing discomfort of foreign sovereign governments holding US Treasury Debt, particularly China ($770 Billion) and Japan ($686 billion). Treasury bond prices have continued to slip in spite of the Fed's effort to bolster this market by simply printing money and buying T-Bills. As prices slip, so do the value of these foreign holdings, and the value of the dollar itself. It should be no mystery that China and Japan want to divest themselves of some of this debt. It's the cloak & dagger secrecy of it that I find curious, and also the fact that the US media largely ignored the story. (I suppose that should come as no surprise).
The root of this tooth is the ominous prospect of a default should these bond markets collapse. Since the once "almighty dollar" is really backed by nothing more than confidence in the US, what happens if the massive debt load simply becomes unmanageable? And isn't it now astounding to think that if nations like Japan and China do not continue to buy our debt the US would be in grave peril? Treasury Secretary Geithner's recent trip to try and assure the Chinese their assets are safe may have also been a cheer leading campaign to bolster the faltering bond markets. He was practically laughed off the stage by Chinese university students.
Is the US becoming a laughingstock of the world because of our massive and unsustainable debt?
