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Politics : The Obama - Clinton Disaster
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To: GROUND ZERO™ who wrote (8377)3/5/2009 4:04:52 PM
From: DuckTapeSunroof  Read Replies (3) of 103300
 
Re: "China isn't holding U.S. bonds?"

LOTS.

(Second largest foreign horde of US Treasury debt, after Japan's stash.)

But since we are their primary export market (& their economies are so export-intensive) they get paid in Dollars --- therefore they have a need to 'sterilize' all those dollars that they get paid in or else they cannot keep the value of their home currencies low vs. the US Dollar (the currency peg would be unsustainable - the Hedgies would pick them APART).

So, to a large extent they are forced to purchase our bonds (so long as they export so much to us and wish to keep their currency depressed in value) as a way of sterilizing the hundreds of Billions of Dollars they take in trade.

Also --- one other factor --- if they ever started precipitously to dump their Treasury holding, then Treasuries would rapidly decline and their existing Treasury horde would loose value as well... they would be shooting themselves in the foot.
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