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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Poet who wrote (8326)	9/26/2007 9:13:11 AM
From: Hawkmoon	Read Replies (1) \| Respond to of 33421

is the US government able to give buying preference to Americans rather than foreign vendors? Hmm.. not sure about that since new bond sales are held by electronic auction. I believe the process is rather anonymous (via big bank transactions). But you're certainly correct that the steady flow of "vendor financing" that occurs with each monthly trade deficit competes with the "regular" T-bill market (fixed income and risk-adverse investors) which is growing as the US baby boom population increases (I know my father is trying to find a "risk-free" way of making 5-6% per year for his retirement). So ironically, despite all the talk about our national debt being held by foreigners, it's a choice those "vendors" have made deliberately held firm with despite what has effectively been a devaluation of the USD. Would the Chinese "dump" their holdings of T-bills? Maybe... But I don't think they want to repatriate it, and investing in the already expensive Euro is not an option (given the pressure it's putting on Europe's exports to the US). They might rediversify into other assets, or maybe even launch into a buy-out spree of US corporations in a form of debt to equity exchange. But clearly they know that the entire underpinning of the Chinese economy depends upon maintaining open markets in the US. The consequences of a major recession in China are something they certainly wish to delay as long as possible, IMO. Hawk