The Euro Dollar.
Who Will Buy The U.S. Treasuries That The Fed Stops Buying?
European Quantitative Easing?
With the Fed seemingly determined to end its multi year/multi trillion dollar money printing quantitative easing (QE) program, many have pondered who will buy the U.S. Treasuries at the current prices in order to maintain low interest rates. Russia and China have stopped buying U.S. Treasuries (and have started selling) and the Fed is scheduled to stop buying them by the end of the year.
Belgium has appeared in recent months as a large buyer of U.S. Treasuries.
Perhaps with the European Union talking openly about warding off deflation by instituting their own QE program, we may be witnessing the birth of the Euro Dollar. Part of the Euro QE program might go towards printing Euros to buy U.S. Treasuries. A new Euro Dollar can be modeled off the Petro Dollar in that the U.S. continues to provide defense support to the NATO countries and in return Europe is required to buy billions of dollars of U.S. Treasuries.
As Russian and China attempt to wean themselves off the U.S. dollar and trade in currencies other than the dollar, they will increasingly trade in Euros. If the European nations increase their U.S. Treasuries reserve holdings, Russian and China by accepting Euros in lieu of dollars will still indirectly be accepting dollars.
Under a Euro Dollar system, international demand for the dollar would remain strong and the Euro would weaken vs. the dollar (an EU goal).
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