China and Russia Add To Their U.S. Treasuries Positions
China and Russia may be working on developing their own digital currencies, but in the meantime they are also rebuilding their stacks of U.S. Treasury securities they sold off during the past few years.
China was particularly troubled when the U.S. Federal Reserves embarked on quantitative easing in 2009 and took interest rates to zero. Russia sold off a good portion of its Treasuries after the US and other nations imposed sanctions on Russia in 2014. Both countries developed de-dollarization initiatives in response to U.S. monetary and foreign policies that included selling U.S. Treasuries and adding gold to their foreign reserves.
China and Russia have stopped selling their U.S. Treasury holding and began buying Treasuries late last year.
Chinese Holdings of U.S. Treasury Securities
Chinese are the number one foreign holder of U.S. Treasuries
Russian Holdings of U.S. Treasury Securities
Russian holdings of U.S. Treasuries increased 36% from September 2016 to September 2017.
Saudi Arabian Holdings of U.S. Treasury Securities
In April 2016, Saudi Arabia threated to dump its US Treasury holdings if the US Congress passed the 9/11 bill. Congress passed the bill in September of 2016, President Obama vetoed the bill and on September 28, 2016, congress overwhelmingly voted to override the President’s veto.
Despite threats to dump U.S. Treasuries, Saudi Arabia has added them to reserves.
The Fed protects the dollar first and foremost, not the stock market or even the too big to fail shareholder interests. Without the dollar neither of the latter two can function. Everything runs on the dollar.
The monthly data on holdings of long-term securities, as well as the monthly table on Major Foreign Holders of Treasury Securities, reflect foreign holdings of U.S. securities collected primarily on the basis of custodial data. These data help provide a window into foreign ownership of U.S. securities, but they cannot attribute holdings of U.S. securities with complete accuracy. For example, if a U.S. Treasury security purchased by a foreign resident is held in a custodial account in a third country, the true ownership of the security will not be reflected in the data. The custodial data will also not properly attribute U.S. Treasury securities managed by foreign private portfolio managers who invest on behalf of residents of other countries. In addition, foreign countries may hold dollars and other U.S. assets that are not captured in the TIC data. For these reasons, it is difficult to draw precise conclusions from TIC data about changes in the foreign holdings of U.S. financial assets by individual countries.
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