[smiley]

Take a look at the latest TIC data. They show the foreign accumulation of US treasuries.

http://www.ustreas.gov/tic/mfh.txt

What is interesting is that contrary to the popular opinion, Japan and China have become net sellers of treasuries. But someone is buying them. And they are buying them at a staggering pace, using the Caribbean as their buying point. If it weren't for them US treasuries would have been taking a nosedive.

So far I have come across several explanations:

1) The buyers are hedge funds. I think this is very unlikely since the hedge funds could not raise this amount of capital in such a short period; not $75 billion in 5 months. And why should they?

2) The buyers are the United States themselves. They are "monetizing the debt", printing money to buy their own debt. Creating debt is OK as long as you find someone to buy it. However when you have to print the money yourself it leads to tremendous inflation. That's why they wouldn't want anyone to know and are using the Caribbean to create the illusion of foreign buyers.

It seems a logical explanation, only Greenspan seems genuinely surprised about the behavior of the treasuries markets which wouldn't make sense if he's the one who's behind it.

So what if, (and this is a long shot).

What if some country (e.g. China) is buying their own secret stash of treasuries. It could well be because everything they have sold in the past few months has been immediately absorbed by our mystery Caribbean buyer. If nobody knows that they are buying, nobody will know when they sell.

So by unloading them they would have the ability to detonate the financial equivalent of an atomic bomb smack in the middle of the US continent. And nobody would know they did it. Nobody can blame them.

And yes they would probably get hurt in the process. But as things are going now they will probably find themselves engaged in an economic war with the US anyway, so why not throw the first punch.

It might be a bit paranoid but it would certainly make a tremendous novel.

[MD]

Here's a second noid, now you have a pair....

The Caribbean question is a puzzle for sure. I suspect that it is indeed the US buying back it's own debt. The Chinese angle is interesting...

[I_Like_Plants]

Good post! I read sites like dailyreckoning and urbansurvival, depression2.tv etc and heard something about a mystery Caribbean buyer but kinda forgot about it.

Financial war is a definate possibility and probably the only one an aggressor could win - we're awfully good at the fighting kind.

And remember to the rest of the world, even to our friends, we're a rogue superpower, a big, spoiled, sociopathic bully. A financial war against us, even to people who are the nice guys, forgetting not-nice people like the Chinese and the Islamists, could be considered The Right Thing To Do (tm)

[some_guy282]

Definitly an interesting topic. I'm leaning towards the US buying its own bonds through the Caribbean banks as well. Those trillions of dollars missing from the Pentagon's budget have to be put to use somwhere.

If the US did fudge the books and take a few trillion from the Pentagon's budget to use and influence financial markets, they could actually keep this charade up for quite a while. Unless of course, China rapidly accelerates the pace at which it's selling its bonds.

This has high potential to get very ugly. I'm not optimistic about the state of the economy by year's end.

[hull3551]

I always felt it was the hedge funds. Although they do not have $75 billion in assets, they are so ridiculously leveraged, they could possibly be investing these amounts. Unfortunately, my knowledge of hedge funds is limited so I do not know if this would be plausible.

On the China note: I’ve been reading some interesting stories in the Asian Times (www.atimes.com) about the cushy relationship between Iran, Russia, and China (and to a degree, the EU). Iran will likely be invaded by the US and there will really be no was to oppose this from a military standpoint. The best way to do this is without a drop of blood being shed by the Chinese if they are indeed acquiring these debt instruments covertly, thus affording themselves added leverage for (what I view as) an inevitable conflict – whether in one year or twenty – with the US.

[nero]

Note the UK (which includes the channel islands) has also doubled their holdings of treasuries in less than a year.

I don't buy the US government fudging their books argument. That is a conspiracy theory that has the failing of many conspriacy theories that it needs many people to ignore their own self interest and not leak the information.

I think this is a big story, and we do really need to know who is buying these bonds and why. What does it say about their belief in our economy that they can't find any better place to stash their cash? My guess is that it is the oil money from OPEC and Russia and the IOCs finding a temporary home before they find something to buy. Notice how the OPEC holdings hardly changed over this period. And what's with Norway halving their treasury holdings in a single month?

[tdrive]

$this->bbcode_second_pass_quote('', '1')) The buyers are hedge funds. I think this is very unlikely...

[jaws]

The problem with the theory of US monetizing debt is that the excess supply of USD would cause immediate depreciation of the dollar on world markets and rapid inflation, which we haven't seen. In fact the opposite has happened during the same period.

Hedge funds are the most likely. Their buying decisions are made with computers analyzing past market behavior (just like how Deep Blue plays chess) meaning that China and Japan getting out of the game would trigger a "buy opportunity" in their programming. As for being able to raise capital, if banks are willing to hand out interest-only loans to garbagemen, what do you think they'll say to a big hedge fund?

[smiley]

I still have my doubts about the Hedge funds.

It is true that the Caribbean and The British Islands (Isle of Man) are favorite locations for hedgefunds. But the biggest of them all is Luxembourg. It's position is about four times as large (800 billion) as the Cayman Islands (200 billion).

So why don't we see any buying there?

[RonMN]

Is there any way to tell what they are using to buy these US Treasuries? Are they using german marks to pay for them? US dollars? Euros?

That may shed a clue on who this carribien buyer(s) might be.

FOLLOW THE MONEY!

[Tyler_JC]

Ron, I think bonds are now purchased using paper bags full of cash, hidden under oak trees. The seller comes by at midnight to collect the cash and leave a stack of bonds. Ten minutes later, the secret agent collects the bonds and that's the end of the transaction.

But seriously, I think it's hedge funds. 75 billion is not that much money. Bill Gates could come up with that kind of cash relatively easily.

Remember, I can take out a loan from Japan at 1% interest and buy American bonds at 5%. I make 4% a year and don't have to actually do anything. Hedge funds are big on this kind of trading (I belive it's called the Jerry Trade). It would be possible for several large funds to come up with a trillion dollars. It is possible to buy on margin you know. It is also possible for the US government to be buying its own bonds. But I have a hard time believing that we wouldn't notice it (in the form of 14 dollar candy bars).

[FatherOfTwo]

$this->bbcode_second_pass_quote('smiley', 'T')ake a look at the latest TIC data. They show the foreign accumulation of US treasuries.

http://www.ustreas.gov/tic/mfh.txt

What is interesting is that contrary to the popular opinion, Japan and China have become net sellers of treasuries.

[erl]

$this->bbcode_second_pass_quote('Tyler_JC', 'R')emember, I can take out a loan from Japan at 1% interest and buy American bonds at 5%. I make 4% a year and don't have to actually do anything. Hedge funds are big on this kind of trading (I belive it's called the Jerry Trade).