Brad Setser

Brad Setser: Follow the Money

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Who bought all the Treasuries the US issued in 2008? And who will be the big buyers in 2009?

by Brad Setser
February 26, 2009

And just how important is China — clearly now the largest single holder of Treasury bonds — to the market?

Both questions matter more than ever — to the market, and to the US government.

There is no doubt that central banks and sovereign funds, led by China’s reserve managers, were huge buyers of Treasuries in 2008. The work I have done with Arpana Pandey suggests that central banks bought close to $600 billion Treasuries in 2008 — with China accounting for a bit over half the total. Total central bank reserve growth likely was around $1 trillion in 2008 (though obviously it was much higher earlier in the year than later in the year; $600 billion is consequently a plausible sum. That estimate is far higher than the number reported in the TIC data — but the TIC data also is known to under count central bank purchases. Watch what happens when the survey data comes out. $600 billion is also a record. Back in early 2004 — at the peak of Japanese purchases — total purchases of Treasuries only reached $300 billion.

The US must then now be completely dependent on the central bank bid.

Not really. Total ‘marketable” Treasury issuance – if the marketable Treasuries that the Fed sold to finance its lender of last resort activities are counted as increase in the outstanding stock of marketable Treasuries — topped $1.6 trillion in 2008.

That implies, if the Pandey/Setser estimates for official purchases are right, that private investors snapped up more Treasuries than the world’s central banks. Central bank demand accounted for a far smaller share of total issuance than in the past few years. In 2007, for example, central bank purchases easily exceeded total issuance. The big increase in demand for Treasuries in 2008 came from private investors in the US. The “money” graph:

Moreover, with global reserve growth slowing — total reserve growth was close to zero in q4, and it may not be all that much higher in q1 — central bank demand for Treasuries is likely to fall. Central bank purchases in the last part of 2008 were inflated by a shift out of Agencies, but that (presumably) won’t continue forever.

That implies, I think, that the ability of the US to finance large deficits at low rates depends far more than it has in the past on private investors willingness to buy Treasuries. That was in doubt a few weeks ago when the markets were focused on the risk of a Treasury bubble and the scale of the Treasury issuance associated with the stimulus and various bailouts. Now the market is more focused on the risks tied to a strong global downturn — and the remaining risks in the financial sector …

Net/ net is the US more or less reliant on China? That is an issue that seems to be on everyone’s mind.

Andy Xie expresses the common concern over at the New York Times:

China is the largest owner of the U.S. treasury bonds. Some estimates put China ‘s holdings of the U.S. debt papers at $1.7 trillion. Since President Obama’s $783 billion fiscal stimulus will be financed by issuing more treasuries, there’s no doubt China’s continued buying of the bonds will be essential.

In one sense, Xie is right: The sheer scale of the United States’ governments borrowing makes every buyer more important.

If China suddenly stopped buying Treasuries in the way it stopped buying Agencies last June, it would almost certainly have an impact on the market. Unless, of course, the Fed stepped in — but that too would have consequences.

On the other hand, today’s world is very different from the world of 2005, 2006, 2007 or even the first half of 2008. The United States’ current account deficit is smaller, which means that there is less money for the surplus countries (in aggregate) to recycle back into the Treasury market. Nor are emerging market central banks recycling private capital inflows back into the Treasury and Agency market.

Conversely, America’s household savings rate has increased – and Americans, after long shunning low yielding Treasuries in favor of risk assets with more (potential) upside — have rediscovered the joy of knowing that you will get your money back, with a small amount of interest.

A world with $1750 billion US fiscal deficit and a $500 billion US current account deficit only works if Americans are willing to buy an awful lot of Treasuries. The borrowing need of the US government is now far too big to be covered by the (much reduced) growth in the emerging world’s reserves.

That leaves aside the possibility that key central banks might reallocate their portfolios. Americans could buy a lot of Agencies, allowing a country like China to finance Treasury purchases through Agency sales. But setting aside flows into the Treasury market from the ongoing sale of Agency debt, the slowdown in global reserve growth implies a slowdown in central bank financing of the US.

Even as issuance rises.

The overarching assumption behind the stimulus is that a rise in US household savings (linked to the fall in US household wealth) will create a pool of domestic savings that will flow, given the ongoing contraction in private investment, into the Treasury market. The rise in private savings and fall in private investment will allow the US government to borrow more even as the US economy as whole borrows less from the rest of the world. The key to the Treasuries rally in 2008 was the surge in private demand, not the strengthening of official demand. My guess is that the Treasury market will be driven by developments in the US – not developments in China – in 2009.

If the US issues $1700b of marketable Treasuries in 2009, China would need to buy around $250 billion to maintain a 15% share of the total market.

That isn’t at all implausible if capital outflows from China subside. Let’s say other central banks buy another $200 billion (which implies a further reduction in central banks’ share of the outstanding stock of Treasuries in the market). Custodial holdings of Treasuries over at the New York Fed have continued to creep up in the first two months of 2009, even as overall global reserve growth remains subdued. The resulting $450 billion in total central bank purchases would be the second highest level of demand for US treasuries from foreign central banks on record. But the math only works if private investors snap up $1250 billion of Treasuries, or a little more than they bought in 2008.

Thanks to Paul Swartz and Arpana Pandey for help with the collection and analysis of the Treasury issuance and TIC data. The data on the outstanding stock of marketable Treasuries comes (via bloomberg) from the monthly statement of the public debt. The adjustment for Treasuries held at the Fed is based on the Fed’s balance sheet data. Our methodology for estimating true official purchases of Treasuries is explained in our recent paper on China (watch for an update).

75 Comments

  • Posted by Charlie

    I don’t foresee increased private purchases of US debt as a long term trend unless interest rates go way up. Central banks don’t care too much about yield. Rather they care more about their currencies. Private investors do care about yield.

    Equities have performed badly, but there are healthy non-financial companies that pay a good yield. Companies that produce required goods like food. Why would someone accept 2-3% from treasuries when they can easily get 5%+ from a solid company?

    In the short term, as long as the stock market is tanking, the US can sell treasuries to panicked private investors, but the market can’t tank for long. Eventually either the gov’t deficit has to shrink dramatically or interest rates need to go up.

  • Posted by Rickster

    Of course, if the stock market starts to improve, that means the economy has stopped shrinking and with growth comes higher tax revenues and less counter-cyclical spending (unemployment compensation, grants to states, etc.). And that would mean a smaller deficit and less supply of Treasuries. The dollar at some point will have to decline so exports will increase. For lots of folks the trauma of seeing there stock based 401K plans and IRAs fall by 50% or more just as they were hoping to retire will mean that capital preservation value of Treasuries will be sought after for a long time.
    As for the this situation, only time, savings, and debt default will restore personal balance sheets in the U.S and much of Europe. Only time and an extended period of underinvestment will create oppotunities for renewed business investment to replace obsolete plant and equipment. And it will take time and pain for the U.S. and world economy to adapt to an environment where the U.S. savings rate is 10% and personal consumption is only 60% of the economoy and not 70%. Perhaps the current catastrophe in Japan will motivate the Chinese, Koreans, and other Asians to rethink the “export lead” model of growth that Japan created.

    In the meantime Keynsian amelioration through Goverment spending and public investment will have to carry us through to the other side of this Fisher/Minsky cycle.

  • Posted by Nick Rowe

    Great work!

    But the US Fed only sells US Treasuries and buys other assets because everybody else wants to do the opposite.

    And the US government only sells US Treasuries and buys goods (fiscal policy) because everybody else wants to do the opposite.

    If everybody else stopped wanting to buy Treasuries, the US would not need to sell them.

    http://worthwhile.typepad.com/worthwhile_canadian_initi/2009/02/i-hope-hillary-fails.html

  • Posted by halbhh

    $1.2T compares very roughly as about 9% of US output. This seems temporarily possible, due in part to putting cash to work from the sidelines. How much cash is sitting in money market accounts? How much will treasuries fetch? Will more private cash from non US sources flow into treasuries. It will be interesting to get other views on this.

  • Posted by Dale

    Brad,

    Wasn’t all of the private purchases of Treasurys merely a shift out of the stock market and other riskier markets? If so, won’t this dry up shortly, when the stock market stops going down?

  • Posted by Twofish

    bsetser: If China suddenly stopped buying Treasuries in the way it stopped buying Agencies last June, it would almost certainly have an impact on the market.

    China stopped buy Agencies and started buying Treasuries which meant that the total amount of purchase was limited.

    Also, it ia very unclear where private ends and public begins now. Are the treasury purchases from a bank that is nationalized or about to be nationalized private or public?

    If a bank borrows money from the Fed using mortgage backed securities as collateral, and then uses that money to buy Treasuries. Is that private or public? It’s a private agent (assuming the bank doesn’t get nationalized), but the bank can only do this transaction because the Fed is extending credit.

  • Posted by Bonesetter Brown

    Echoing Dale’s comment, what is the correlation between crashing asset markets and private purchases of treasuries in 2008? I imagine the quarterly data would hold the story if there is one to tell.

    I don’t see the income stream that will make up the $1250B gap. It seems the options are another year of crashing markets, printing by the Fed, or some combination of both.

    Please tell me this is wrong!

  • Posted by Cedric Regula

    Here’s the Fed report on M2, savings plus money market accounts. Presently a little over $8T. This increased roughly by 1.1T from what it was 2 years ago(let’s assume it’s there for a reason.)

    http://www.federalreserve.gov/releases/h6/current/

    So another 650B and we are covered. CBs plus a small increase in US personal savings rate can cover that easily.

    But then there is the 10 year game plan hinted at by Obama in the budget aticle that Brad linked to at FT.

    We are going to have middle class tax breaks, universal health care(probably some quasi variant of it), more support of free flowing bank credit (read bank bailouts, if you haven’t yet switched your dictionary from the republican to democrat edition yet), all funded with more treasury sales in following years at presumably 3% interest or less, independent of the then inflation rate(keynes said it doesn’t matter if interest rates are nominal or real?!?!?!), increase the personal savings to maybe 10% to buy treasuries and also have consumers spend us to prosperity, and of course cap and trade our way to global cooling, so we can make the choice of affordable solar energy available to all, at the expense of higher gasoline prices, electric utility bills, and probably all other spending on necessities.

    And of course no one including foreigners will ever sell treasuries during all this. ( as we get a downgrade from Moody’s on the national debt level)

    OK. Hang on to your hats. It’s gonna be a bumpy ride.

  • Posted by don

    Brad –
    Another informative post.

  • Posted by Qingdao

    Why not run a stress-test on the Chinese economy? Assume: plunging exports, imports plunging even more, unemployment (and “mass incidents) rising at a rising rate, capital flight + massive injection of capital into a declining export sector. Allow this to continue for a few months and I think you end up with something that looks like Indonesia after the last Asian crisis. The dollar will rise; exports slow; greater demand for treasuries rises as uncertainty increases.

  • Posted by Cedric Regula

    Qingdao

    I think that will happen with Eastern and Western Europe first. Then if China joins in, the US will be the World bank account for everyone, backed by the US taxpayer.

    haha. just kidding.

  • Posted by Qingdao

    “Tax data show much sharper deceleration in income and consumption in the past few months than suggested by official retail sales or income growth figures,” Goldman Sachs analysts Joshua Lu, Caroline Li and Fiona Lau wrote in a note today.

    Value-added tax has “de-linked sharply” from retail sales figures, the analysts wrote. VAT rose 1 percent in the fourth quarter from a year earlier, while retail sales gained 21 percent, according to the note….

  • Posted by seatrus

    China’s economy does not need stress test. The result is fairly predictable:
    Increased risk of unrest in China -> increased chance the Chinese government has to redistribute wealth -> increased income for the poor and middleclass -> increased consumption (remember: the poor is more likely to spend the extra income) -> better economy in China

    The above is opposite to what will happen in the U.S.:
    Decreased expectations on job security and decreased return on investment -> increased savings by the middleclass and the rich -> less consumption -> worsening economy.

    The difference is that the Chinese government has money to redistribute and will do so without any ideological in-fight.

  • Posted by K T Cat

    Yesterday we had horrible home resale news. Treasuries should have gone up in price, but instead went down. Today we had dreadful employment and other news. Treasuries should have gone up, but instead went down.

    It looks like Treasuries are no longer reacting predictably to financial news. That seems to say that we have reached the point where there is more supply than demand since prices keep falling.

    Looking at Obama’s budget, he’s asking for something like a 6% increase in discretionary spending. Entitlements are guaranteed to grow. More and more and more supply of Treasuries.

    Japan’s economy is getting killed. They may soon have to sell Treasuries, even if China does not. Expecting the US citizen to make up the difference between the mind-blowing supply and shrinking foreign demand is too much for me to swallow.

  • Posted by Too Much Fed

    What if the fed is trying to set up a “carry trade” for the banks???

  • Posted by B

    >a rise in US household savings [is] linked to the fall in US household wealth…

    I don’t get this part. How can this be?

  • Posted by jimspassion

    And Brad is maybe right in deleting your post’s you don’t seem to have much in the way of table manners ( nothing that time and life won’t heal ) – you are obviously pro equities I wouldn’t be holding my breath if I was you – just look at S&P earnings and you will get a sense where equities are going and may also remain for some time – sophisticated investors don’t invest on hopes or a whim they invest on fundamental strengths that are dominating the market place – and who would want to buy a house for investment it’s what the unsophisticated investors do with their working lives in a hope it may led to riches it just makes them a slave to their jobs when it’s all said and done and the rug is pulled out from under their feet ( which by the way is in some cases from their own doing ) the rich get richer ever heard this before?
    K T Cat – good points you make – Confidence is key here and human nature is so predictable it is only we humans as individuals that think that we are not this can be very costly when we let bias and ego run our minds – as the world continues its great unwind then surely they is less in the pot to go around the question is who gives more of their share and who keeps more – ever noticed kids fighting over lollies even though they have been taught to share it shows that sometimes the quest to satisfy our greed overtakes our judgment of what may come back to me if I share and study the long term picture.

  • Posted by Michael

    Brad,

    Can you explore the data on how much of the recent dramatic rise in bank reserves is in the form of recent Treasury acquistions, and how much of the money for those Treasury acquisitions (or the Treasuries themselves)was provided by the Fed &/or the Treasury Dept? To the extent that increase in the current – and future – supply of Treasuries is paid for by the Fed itself (or by the Treasury as bailout money to banks that then buy Treasuries), we are misled if we count that as increased “private sector” domestic Treasury purchases (even if it is accounted for as being owned by the banks and sitting in their reserves).

  • Posted by DOR

    Qingdao,
    The Chinese haven’t rioted due to unemployment for many, many decades. The “mass incidents” of recent years are wholly due to corruption, abuse of power and non-payment of wages. In the 1980s, the cause was primarily inflation. I won’t postulate that the Chinese WON’T riot over unemployment, but just point out that we have zero real world experience with such developments.

    KT Cat,

    When you add in the cost of two wars to the previous budgets, this one looks quite modest. The increase is only $71.2 bn in discretionary spending.

    = = = = =

    Indian Investor,

    No offense intended, but commenting on today’s mess without using terms such as “horrible”,”dreadful”, and “shrinking” suggests that one simply doesn’t get it.

    This isn’t a recession. And, Japan’s economy IS getting killed, as are many others. Your explanation was interesting, but unconvincing.

  • Posted by Stuart

    Private Investors may take a large portion of the remaining debt but ONLY if rates materially rise to make it worth their risk of default. AND why should they when, as pointed out, there are many quality companies with dividends yields much higher than what treasuries offer. I sure as hell wouldn’t buy them and I would guess I am typical in that opinion. Ben start those presses.

  • Posted by Indian Investor

    http://www.cfr.org/content/publications/attachments/Debt_and_Power_CSR37.pdf

    I suggest reading this paper (Sovereign Wealth and Sovereign Power) to know the context in which Brad Setser says that it’s possible to finance US Treasuries from private financiers.

  • Posted by Counterpointer

    Great that you guys are finally catching up.

    Well done. We’ve been working this over for a month at CR.

    There’s gotta be a way of better joining forces.

    Ideas on the back of an envelope..!?

    C

  • Posted by Off the boil

    All,

    “private investors snap up $1250 billion of Treasuries, or a little more than they bought in 2008 ”

    Typically WHO ARE THESE PRIVATE INVESTORS ?
    Sounds more like “Wealthy Arabs”.

    I doubt if the private investors would be buying this many. It has to be SAFE buying thru other routes.

    anyone with any ideas ?

    Counterpointer – Good to see you here.

    Indian – If you have the deleted post, could you pls put it on your blog ? I tempted to read since DOR acknowledged as :”interesting”

  • Posted by Hal

    I am convinced that not too far into the future the Chinese will profoundly regret having invested so much of their earnings in US bonds. When the dollar collapses, as it surely will, much of their wealth will vanish, just as wealth has vanished in the recent stock market decline. Instead of hitching their development to US consumption, they should have hitched it to an expanding internal market in China.

  • Posted by AS

    Bob Prince at Bridgewater had the following to say earlier this week…

    “As we have showed before, we estimate that the combination of government revenue shortfalls,
    spending programs and financial assistance will produce a total U.S. Treasury borrowing requirement
    of $2 trillion this year. To put this into perspective, the following table shows the extent to which
    investors now hold Treasuries and the amount of new Treasuries that these players would have to
    buy if everyone bought the new supply according to their current ownership share. As you can see,
    the total outstanding supply of Treasuries at the end of the third quarter of 2008 was $5.8 trillion. $2
    trillion of new issuance would amount to a 35% increase in the outstanding balance in a one year
    period. And this would have to happen at a paltry yield of 0% to 3%, depending on the section of the
    yield curve. In other words, the amount of buying would have to be unprecedented by nearly every
    existing holder while the yield incentive to do so is lower than it has ever been. The only reason to do
    so would be fear, assuming that you have the cash to do it.”

    Is there really a buyer out there for the huge expected issuance of US treasuries outside of the Fed?

  • Posted by Off the boil

    “the following table shows the extent to which investors now hold Treasuries and the amount of new Treasuries that these players would have to buy if everyone bought the new supply according to their current ownership share.”

    Would love to see this table.

    Anyone has this at any source. Links Pls.

  • Posted by Enrique

    Brad:
    Excellent Post, as always
    I think Michael has an interesting Question.
    ¿Are Treasuries used to bail out banks/AIG included in your private purchases?
    ¿could you please comment?

  • Posted by K T Cat

    I wonder how much of the Treasury purchases have been people moving their retirement accounts from stocks into government bonds. I know I did. That sort of thing is a one-shot deal, though and not something that can provide a consistent demand for Treasuries.

  • Posted by Kafka

    Mr. Setser, thanks for the info, very nice. While BO and his socialist pals absolutely disgust me is he at least being honest about the current U.S. economic climate in his rhetoric? Aside from the ludicrous budget projections for growth and tax revenues, he is probably understating the devastating economic effects of the current liquidity trap. While I do not believe in conspiracies per se because the current and past Government thefts that have occurred are readily apparent, funds flow data seems to suggest a substantial portion and increasing proportion of Treasuries were purchased by the private sector. Most suggest this is as a result of the tanking stock markets. Is it possible BO and his socialist pals are deliberately trying to keep the markets low (or worse) so private capital will continue to increase its funding of massive government growth through the purchase of Treasuries? Given that most Politicos except apparently BO (and he is the ultimate Politico) talk up the economy, the cash trail would certainly seem to suggest BO would prefer the side lined private capital go into Treasuries as opposed to the stock markets, the cash trail never lies. Note, fixing the banking sector aint that complicated but the more complicated it is made to appear and the more uncertainty created, the more likely it is private capital will flow into the much needed funding of treasuries. Is the Government now effectively in competition with all the companies it now controls for private capital? Is the government the ultimate manipulator of markets of proportions that Gross and Soros could not even comprehend?

  • Posted by bsetser

    Indian investor. I think you promised that one of your earlier comments would be your last comment. i intend to hold you to that commitment.

    enrique. my calculations are based on the change in the stock of marketable treasuries issued by the treasury (net of any purchases/ sales by the fed). consequently the treasuries issued to fund the TARP would be included in the calculation. the initial bailout of AIG was done on the fed’s balance sheeet (as a loan v AIG the company as collateral) and thus wouldn’t appear.

    off the boil — based on the pattern of 2008, most of the $1.2 trillion in purchases would have to come from domestic investors. investors from the gulf could reallocate their existing portfolio toward treasuries, but on a flow basis, they are sellers of financial assets not buyers at current oil prices. the current account deficit defines the net amount of capital the us imports from the world. and right now it is running at around $500b. that could change, but it does provide some paramaters for thinking about the scale of likely external financing.

  • Posted by Off the boil

    Brad –

    Who are the typical domestic/private investors ? ibanks ? SWFs ? I am slightly confused with the “private investors”

    I wonder who on earth are saving $1.2 Trillion to buy T bills ?

  • Posted by Scis

    Maybe a dumb question- but how dependent are these estimates on the US maintaining it’s current credit rating?

  • Posted by monaco

    Who will buy? by the 2nd half of 2009 i can promise it wont be the oil producers…

    obama issued long term checks for trillions and the guy has only been in office 6 weeks.

    have to admit, the United States is far more left than even Europe. Who would have thought?

    DJIA5000.

  • Posted by bsetser

    off the boil —

    money market funds. used to buy commercial paper. now don’t want to break the buck.

    retirement accounts of individuals burned in the stock market.

    pension funds.

    anyone with a short-term liquidity need (i.e. debts coming due in 3ms/ need to hold cash to guarantee payments), etc.

  • Posted by gauis marius

    mr setser — again excellent and informative as usual. i don’t comment here often enough for my liking, but i wanted to direct your attention to this analysis linked from BNY mellon.

    they ran the sums on increased domestic savings, and found that even at a depressionary increase in private savings rate to 8% between now and the end of 2010 (which would imply, iinm, a (-15%) or greater contraction in GDP) would only make available ~$830bn to treasury. given that deficit spending over that time period is likely to be ~$4000bn, this leaves a tremendous hole even after including foreign annual demand on the order of $500bn.

    the only two ways i see it being filled — and you can edify me w/r/t alternative paths — is the difference being either i) vomited out of capital markets, ie stocks and corporate debt; or ii) fed monetization. BNYM concluded monetization; i suspect both. thoughts?

  • Posted by gauis marius

    That sort of thing is a one-shot deal, though and not something that can provide a consistent demand for Treasuries.

    cat, i would posit that this is so only if you believe the crashing is over. i’d suggest that quite a lot more cash can be forced out of equities, CP and corporates.

  • Posted by Cedric Regula

    John Mauldin has been digging into eastern-western Europe banking woes.

    Treasuries will be our best export this year. Mauldin mentioned elsewhere that the ECB can buy ECU government bonds if all members agree. So far Germany is the loan resistor of the idea. But with bond issue failures and Deutchbank problems, I don’t see how they can hold out. So that will make Trichet rather than Bernanke be the first to buy massive quantities of sovereign debt. That should be good for lots of capital flight out of Europe and the euro, pound, franc and krona.

    So I recommend that the USG sell the 10 year note with a 0% interest rate, and a special transaction tax of maybe around 5%. After all, we are gonna need the money for tax cuts and universal health care. If we are gonns win, let’s win big!

    http://finance.yahoo.com/tech-ticker/article/195065/Europe%27s-Crisis-Much-Bigger-Than-Subprime-Worse-Than-U.S.?tickers=ubs,cs,db,hbc

  • Posted by Cedric Regula

    I’ve been thinking about this liquidity trap problem too.

    There is really no problem that can’t be solved with a little creative tax policy.

    So what we need is a liquidity tax. Say, levy a 5% tax on bank checking and savings accounts, short term money market accounts, and have the government check on the contents of our mattresses. That should get money flowing again.

    During German Hyperinflation the German central bank used it’s Hyperinflation Tool and this resulted in getting Germans to purchase a huge amount of sweaters. Germans thought sweaters were a “store of value”, but were ultimately wrong about that of course, and the government actually succeeded in stimulating the economy because anyone that has ever taken an economics course knows that someone needs to manufacturer, distribute, sell and finance sweaters.

    There is [at least] one caveat here, it may make gold seem more attractive to a larger portion of economic players. So I would recommend coupling the liquidity tax with a gold tax. 5% sounds about right to me.

    Historically, governments have had trouble with money leaving the country when they do these things, and that tends to foul up government attempts to fix the economy. I’ve thought that one thru and decided the USG should avoid capital controls, on the pretext that it would be a “Beggar Thy Neighbor” policy, if a pretext is needed, and fight hard thru the WTO to support free trade of Treasuries and dollars.

    Taken as a cohesive policy bundle, this should work fine and not have any unexpected consequences.

  • Posted by Cedric Regula

    We are going to have to address the global warming cap and trade policy here sooner or later. Our new administration wants to have the trading system in place by 2012. They should be able to dig up the platform Enron used, so systems are no problem, but we need to make the rules still.

    They already asked China if they would like to participate, now that they are the biggest global warming gas producer, but China politely declined, saying that the developed world put the stuff in the air for the last 100 years, not China, and it should be the developed world that takes it back out again.

    When they are right, they are right.

    So what I propose is that the developed world make carbon reparations to emerging countries. This should be included in any fair and balanced cap and trade system. It’s only makes sense that the OECD use petrodollars for payment, and in the case of the US, we can just credit Treasuries to China’s custodial account of Treasuries.

    Now we just need to figure out the rest of the rules.

  • Posted by duke

    I think your assumption regarding private investors may be a little optimistic. Savings, of course, is dependent on production (and by inference, employment).

    However, there was tremendous over-production across all asset classes during the last 7 years, not just in housing and automobiles.

    Many of these goods, particularly those produced over the last 2 years, are in still excellent condition. The resale market for these “newish” used goods can be measured indirectly by private market services such as Craigslist.

    I think that we are going to find out is that while credit driven consumption will continue to fall, the slack for any demand for goods & services will be taken up by private party transactions.

    The result, of course, is much less original production that generates both sales tax revenues at the retail level and revenue->payroll->profit->savings throughout the production/distribution chain.

  • Posted by Glen M

    Indian Investor,

    I think that what the data is showing and what Brad is saying that the current crisis has increased the desirability of Treasuries enough to lure attraction from elsewhere. As such the need for Chinese demand is of lessor importance than what it was prior. The test is the balance between supply and demand.

  • Posted by Twofish

    Qingdao: Allow this to continue for a few months and I think you end up with something that looks like Indonesia after the last Asian crisis.

    Doubtful. Chinese banks are in much better shape than Indonesian banks were, and China has much larger foreign reserves than Indonesia did. Also the Indonesia crisis happened days to weeks after the Thai baht was revalued, so anything that takes months to materialize is already something quite different.

  • Posted by Twofish

    Qingdao: Value-added tax has “de-linked sharply” from retail sales figures, the analysts wrote. VAT rose 1 percent in the fourth quarter from a year earlier, while retail sales gained 21 percent, according to the note….

    Which is consistent with a drop in demand for intermediate industrial goods, but not consumer finished products. VAT is collected on things like intermediate products like concrete, coal, and steel, and a sharp drop in concrete, coal, and steel prices is something that we’ve seen over the last few months.

  • Posted by Twofish

    DOR: I won’t postulate that the Chinese WON’T riot over unemployment, but just point out that we have zero real world experience with such developments.

    Potential riots over unemployment are relatively simply to resolve. You have a group of people that are about to riot because there is no work, well then it so happens that the state-owned enterprise around the corner is looking for apple polishers.

  • Posted by Twofish

    Kafka: . Is it possible BO and his socialist pals are deliberately trying to keep the markets low (or worse) so private capital will continue to increase its funding of massive government growth through the purchase of Treasuries?

    Ummm….. No.

    One reason I distrust putting people that are overly ideological in positions of great power, is that their first reaction when the world doesn’t quite work they way they think it should is to look for people sabotaging the system rather just admiting that the world may work differently than they think it will.

    Kafka: . Note, fixing the banking sector aint that complicated but the more complicated it is made to appear and the more uncertainty created, the more likely it is private capital will flow into the much needed funding of treasuries.

    Fixing the banking sector is massively complicated, and people who deal with private capital and financial markets tend to understand how immensely complicated it is. One thing that I find both sad and amusing is the number of free market ideologues that often have shocking little exposure to the sausage factory.

  • Posted by Qingdao

    2 Fish: I don’t mean to suggest that China’s future difficulties will resemble Indonesia’s absence of sufficient reserves. Obviously, China “learned” (wrongly, I would argue) from the previous crisis. I have in mind a continuing deterioration followed by a “dead cat bounce.”

  • Posted by gillies

    the global financial economy lost contact with the real economy. we accelerated it to such a speed that we began to take off at the bumps. now we are in the air, wheels spinning, with the president hitting the gas and the passengers hitting the brakes. neither are in control. how far to hitting the ground ? we don’t know.

    the real economy will shrink because the real inputs of energy, arable land, soil and water, and room to pollute without adding further economic handicaps – will shrink from here on.

    there is no need for ‘regulation.’ for the time being, folk memory is a powerful corrective. and by the time this crash is forgotten, we will be far beyond booms as opposed to brief rallies in the general ongoing contraction. booms are over.

    why has no other civilisation contacted us ?

    perhaps because this is as far as civilisations go.

    we now or very shortly will have the capacity to destroy ourselves – nuclear, biological, complex pollution causing reproductive infertility, and so on.

    alternatively ‘civilisations’ deliberately return from the technical to the simple and ecological, and cease expanding. it is not the american empire which is on the brink of contraction, but the global economic empire. going to the moon looks at the time as the first step in the conquest of space. in hindsight it is seen as being as far as we can afford to go. no one else will ever go to the moon. that was as far as that project can go. it’s over.

    there is not going to be a ‘next superpower.’ the model of a broken economy held together by the military ‘dominance’ that is the very thing sucking the life out of it – is a broken model.

    that the world is controlled by a global elite is also a comfort fantasy. the idea that the world is in fact out of control, and only the sum of multiple individual and uncoordinated decisions, is too scary for some to bear. so they invent big daddy (good or evil, doesn’t matter) behind the scenes . . .

    bush obama’s power is a fiat currency. it will last as long as we believe in it. ‘would you buy a used car from this man ?’ was famously asked of nixon. we didn’t buy the car, but we are still driving the fiat (currency vehicle) that he sold us. that old 1971 banger. how much further ?

    my answer to – ‘who will buy the treasuries ?’ – is that it does not matter. the china / america game is less and less connected to the real economy. liable to vanish in a puff of smoke. better not to worry about it.

    ask instead – what can we make that they need ? what can they make that we need ? what can we both make that does not foul up the earth and poison the people ? the real economy is the mother of all financial superstructures and wheeler dealer complexifications. nature is in turn the mother of all real economies. ‘wall street’ has those three stacked in the wrong order. their model is bust, too.

    we have passed a historical turning point. faith in industrial growth is no longer an unquestioning faith. financial complexification is a parasite or dependent upon
    industrial growth. belief has broken down.

    the earth has limits. hit the ground running ? we have hit the ground all right – the limits of the earth.

    the handsome and intelligent young president is only miming to the old tune. it’s karaoke time. would you buy the c d of a choir of clinton/bush advisors from this man ?

    no.

    will the chinese ?

    we don’t know what they have been offered along with it.

  • Posted by Qingdao

    Feb. 27 (Bloomberg) — China said its 8 percent growth target for this year is within reach even as the worst financial crisis since the Great Depression hammers economies worldwide.
    2 fish: do you agree with this assessment/

  • Posted by Cedric Regula

    gillis:”why has no other civilization contacted us ?perhaps because this is as far as civilizations go.”

    I’ve done extensive research of sci-fi novels, so I’m an expert on alien civilizations.

    One thing they all seem to have in common is fusion power and wormhole travel.

    Fusion power is like a miniature sun you can keep in a small building (see Spiderman 2 for reference). All you need to do is feed it hydrogen now and then. Remember the excitement about the Hydrogen Economy during Bush’s first election campaign? That’s obviously why.

    The Ministry of Chinese Chaos Theory Mathematicians (MoCCTM) predict humans will gain fusion power technology in the later half of this century and therefore the Chinese Communist Party is planning accordingly.

    MoCCTM has a lot of credibility in these matters. They first developed the mathematical model predicting that if the Party quotes GDP growth numbers of 8% or better, the probability of worker food riots is less than 3%, or well within statistical error.

    They extended the math model to the US GSE market and accurately flagged the Party that trouble was brewing here last summer. The Party was able to move in time and protect Chinese interests.

    So do not underestimate any predictions the MoCCTM makes.

    Wormhole travel is a different story however. MoCCTM attempted to model this but realized wormholes are a consequence of mathematical deduction, but none have been discovered yet. So they are unable to model any real probability of space aliens contacting us.

    I happen to think that we haven’t found any nearby, which would be the easiest place to look, so it may take space aliens a little longer to get here when traveling the last leg thru normal space after a long wormhole jump.

  • Posted by greg

    Qingdao:

    2 Fish: I don’t mean to suggest that China’s future difficulties will resemble Indonesia’s absence of sufficient reserves. Obviously, China “learned” (wrongly, I would argue) from the previous crisis. I have in mind a continuing deterioration followed by a “dead cat bounce.”

    Greg:

    Sufficient reserves weren’t a problem for China during the Asian crisis. China had one of the largest fx reserves at the time and was ready to defend Hong Kong’s currency against massive speculations. China didn’t need to “learn” that lesson. The countries that were hit hard had borrowed heavily, mostly short-term loans, from foreign banks; the foreign investments came in mostly in portfolio investments; the exchange rates were floating (there were a lot criticism on Malaysia when it adopted the pegged currency policy to deal with the crisis, but it eventually proved they did the right thing).

    Contrast that to China, which had a fix exchange rate, had foreign investments mostly in FDI and had sufficient fx reserves. If anything, those countries learned a lot from China. The reason that China has nearly 2 tr USD reserves today is not because it purposely accumulated fx to guard against another Asian crisis.

    I suppose in the current crisis, more than a few countries can learn from China, too.

    I would be careful to make the “coming- collapse-of-China” type prediction; a lot of people did that before …

  • Posted by Twofish

    Qingdao: China said its 8 percent growth target for this year is within reach even as the worst financial crisis since the Great Depression hammers economies worldwide.

    I think it is possible. Optimistic, but possible. There is a huge amount of stimulus money both in the US and China that is going to kick in in about two to three months.

    The question that needs to be thought about is less “Can China achieve 8% GDP growth?” since if you print enough money than anything is possible, but rather “Should China achieve 8% GDP growth? And what happens next year if it does?”

  • Posted by Twofish

    Qingdao: Obviously, China “learned” (wrongly, I would argue) from the previous crisis. I have in mind a continuing deterioration followed by a “dead cat bounce.”

    Why?

    The main thing that would cause things in China to get continually worse is the fall in exports. So lets assume that over time exports continue to fall to zero.

    If this takes place over a year, then as exports fall, you can ramp up domestic spending to make up for the gap.

    The big difference between China and the United States is that China has a functioning financial system, and only major one financial crisis, whereas the US has three interlocking crises (unemployment, banking, foreclosures).

  • Posted by Twofish

    BTW, my view is that China learned most of the lessons correctly from the last crisis, and that is this crisis progresses that will become more and more obvious.

    Already it should be obvious that Chinese banks are in far better shape than US banks. Even if you argue that Chinese banks are being propped up by fancy accounting (which they aren’t), then they are in at least good enough shape that you can prop them up with fancy accounting.

    One other thing is that y/y figures may be misleading since they are going to be incredibly ugly for the next several months. The really important figures are m/m figures which are really difficult to get accurate numbers for. The two problems with month-to-month numbers is that there is an incredible amount of noise in those numbers, and the second problem is that all of the major economic numbers have large seasonal adjustment associated with them.

  • Posted by Twofish

    greg: The reason that China has nearly 2 tr USD reserves today is not because it purposely accumulated fx to guard against another Asian crisis.

    I think that was indeed part of the motivation. China looked at the Asian crisis and saw areas in which it was vulnerable. Even through China didn’t see capital flight in the Asian crisis, there was a belief that as China opened their economy, that there would be new avenues for capital flight which implied that as China did loosen capital controls, that it would have to increase reserves.

    However the *BIG* lesson from 1998 was to have a good banking system. Chinese officials weren’t too concerned about the banking system until 1998, when they saw banks in Indonesia fall and Suharto fall with them. At that point they started undertaking a multi-year program to fix the major banks, which they did. This involved pulling in all sorts of advisors from Wall Street who were happy to tell Chinese banks how to improve risk management since no one in NYC was listening to them.

    The dirty secret of Wall Street is that with the exception of a few banks (and you can tell which one’s since they are the one’s that aren’t on the list of ones that people are thinking of nationalizing), risk management is what you do if you want to end your career.

  • Posted by Twofish

    With the previous post, since the *is* to *was*. Things have changed.

  • Posted by df

    Hi Brad, and cheers to all,
    It s been long since i ve commented much. New job, european elections … Mostly also the feeling : everything happening was just so predictable …

    So it seems we ve finally reach the international turning point. As I commented long ago, the national debt bubble exploded before the international one did. Now it seems the international debt bubble is about to explode.

    Ok. So now I have a question. It has been self evident for me that the Fed has to step in, that the only way out of this debt bubble is throuhg massive FED injections of cash anhilating debt through inflation (or at least a slowing of the deflation rythm).

    So please, Brad could you develop this :
    “Unless, of course, the Fed stepped in — but that too would have consequences.”

    This is my only question, what then would be the consequences of the FED stepping in ?

    Indeed why has not the fed stepped in long before.
    It could have driven the dollar down this way. This would have curbed chinese and asian export growth.

    It s been 5 years now that I ve been advocating huge cash injections and strong regulation in order to drive private agents out of the money printing business.

    Now private that money printing is dead and regulations coming big time, what delays massive cash injections ?

  • Posted by bsetser

    gauis marius

    thanks for the comment; I enjoy your blog –

    I am a bit less inclined to think that the US will have to engage in inflationary quanitative easing to cover the fiscal deficit, for three reasons:

    a) Following goldman, i wouldn’t be surprised to see a household savings rate of 6-8% by the end of 09. Moreover, private investment is declining — both of which free up a pool of savings to flow into the treasury market.

    b) The fed now has an unusually small quantity of treasuries on its balance sheet. if private investors put their dollars into say citi debt, the fed could reduce its credit line to citi — and buy treasuries, replenishing its warchest.

    c) Any treasuries sold to finance the purchase of bad debt off the banks are in effect just a swap with the banks. the government could give the banks treasuries and take the bad debt w/o going through the market process. lots of countries actually finance bank bailouts with special issue treasury bonds that aren’t traded (or carry low coupons) that end up sitting on the banks balance sheet. the us hasn’t done it this way, but if the TARP money injected into the banks flows back into the treasury market, the net effect is the same.

    d) having looked at the survey data, i would expect some central bank reallocation from agencies to treasuries to continue (of course, that creates other problems … ). but also remember that a lot of the funds that previously were flowing into private asset backed securities will be looking for a new home.

    to be sure, there is a possibility that the fed will have to step in — and not just b/c a resurgence in private demand for riskier assets allows it to improve the quality of its asset base. but I see a path where government really does fill the gap created by a fall in private investment/ rise in private savings/ surge in demand for safe assets.

  • Posted by bsetser

    df — if asia keeps its peg to a depreciating dollar, the fed easing doesn’t produce a depreciation of the dollar v the world, it produces a depreciation of the dollar and most of asia v europe, something that increases asia’s surplus with the world, asia’s reserve growth and asia’s financing of the us.

    that at least is what we saw in 02-04.

  • Posted by gillies

    df : stay with us – you provide welcome balance.

    cedric regula ; “I’ve done extensive research of sci-fi novels, so I’m an expert on alien civilizations.”

    no – i am on a completely different wavelength. you are talking science fiction. i am drawing attention to ecological realities. if the financial sector was still expanding as the real economy was beginning to contract – wild inequities and instabilities were bound to follow.

    if i sound too way out for some – a reading of reports about california’s water crisis, and thinking through its implications – might be a lesson nearer to home.

  • Posted by gillies

    there is an old maxim that the man who makes the real killing in the gold rush is the man who sells shovels.

    but we are in part 2 of the gold rush. there is now believed to be no gold in them thar hills . . . . so bad as that looks for the gold prospectors, it is worse for the shovel shop, for the shovel shop’s bank and mortgage provider, for the people who borrowed on margin to buy shares in the bank, and for the thousands of others who bought shredded mortgage paper and believed that it was as good as the gold (that was not there in the first place).

    the boom lasted while the people believed that there was gold up there.

    wall street new york, canary wharf london, singapore ? shanghai ? dubai ? ghost towns.

    a rebound ? the fed is already talking about damping down the rebound if and when . . . .

    people will walk back to the real bread and butter economy and governments and pundits will have no choice but to follow.

  • Posted by Kafka

    Two Fish, funny but disingenuous. I can take the 4th derivative of any Euler equation and concoct whatever causation correlation makes me feel good. At the end of the day all that exists is market price, pure and simple. Try trading the markets 18 hours a day, you may get a better understanding or if that is too hard (because it is), make some long term bets based on your economic theories, all that matters is the math and the market price (and of course getting it right). The Banking problem is simple, most of the banks are insolvent, banks now have a forward looking business model equivalent of utilities and the U.S. economy is merely based on unsustainable debt financed consumption supported by the most powerful military the world has ever seen. The Politicos can dither about all day and perhaps delay the inevitable but only one result can obtain, the math is simple. Citi is done, BAC is next and JPM has the most fraudulent financials of them all. Buiter has a simple solution but no one will listen because it is not politically expedient and well, too simple. I am not complaining since the longer the Politicos drag this mess out with the help of econometric gurus, the more money for my kind (but I feel bad for all the deluded citizens in this country). As for BO and ideologues and the way the world works, perhaps you ought to read your own words? Roubini saw this pending disaster from miles away and used simple math to prove his points yet no one listened (and they still don’t). The world works exactly as it should based on math and Darwin, it is quite simple, read a little history, over time fractional reserve lending with fiat money (or credit) has never ever worked. There is only one destiny for a country that consumes too much, borrows to much, has a relative decline in productions and exports and a powerful military, GWB accelerated the downward spiral and BO may finish it with a massive redistribution of wealth, the only alternative (aside from increasing productions and exports which will never happen). I have put my long term money where my mouth is, short long term Treasuries, short the dollar through a basket of currencies, short financials; the math is simple and I appreciate you and your kind trying to make it complicated, more profit for me, but it aint good for all the deluded citizens of this country.

  • Posted by df

    Brad thanks for your answers and gillies for comments.

    Brad I agree with you partly short term and flow side.

    meaning.
    1I think the fed has already started to step in. I d love to have the numbers on its balance sheet.

    2 Indeed there s a huge consumin and investing crunch, government is stepping in, all it does is using the spare cash that would have ended up being standard speculative money sitting in cash or cash like accounts waiting for deflation.
    This agreement however is only short term, Sooner or later, government debt will be so high that private investors will shun it, so the fed will have to step in and inflate everybody out of debt. which is great provided regulation takes care of redistribution effects.

    3 all this is a look at economy as a flow. I also care about the stock of debt and the stock of capital goods.

    The thing is the debt/ gdp ratio is already over 250%with gdp falling that fast it ll soon be over 350 possibly reaching 500 …(if 1929 teaches us sth about the future)

    That kind of debt level can not be repaid. It has to be deleted either through bankrupcies or inflation or one then the other.

  • Posted by Kafka

    While my econometric skills are severely lacking, if the Fed, I mean Goldman is right and savings sky rockets to 8% what happens to consumption? If consumption continues its rapid decrease, what happens to GDP? If GDP continues its rapid decline, what happens to tax revenues (which are already on the decline)? If the Fed, I mean Goldman is correct and S&P earnings go to $40 for 09 doesn’t that mean many corporations will be operating at a loss given the massive amounts of debt accumulated to fuel the consumption growth (we already know if you add in government theft and bad debt losses, the banks will overall never be profitable on a cumulative basis in our lifetimes)? If increased savings go into Treasuries, surely it will only be short term, what about long term Treasuries? If unemployment continues its increasing rate of increase or even levels off, what happens to GDP and consumption? How does borrowing money to allegedly stimulate the economy (and line the Politicos and their friends’ pockets) do anything but under the best case scenario prevent a more rapid decrement in a debt financed consumption based economy? BO is likely gonna add about $10 Trillion to the national deficit in a period of declining revenues, how is that gonna solve anything especially since it is unlikely the rate of production or exports will increase? Whack a mole is a game for children. Schumpter and Darwin knew that of which they spoke.

  • Posted by greg

    Twofish:

    “I think that was indeed part of the motivation. China looked at the Asian crisis and saw areas in which it was vulnerable. Even through China didn’t see capital flight in the Asian crisis, there was a belief that as China opened their economy, that there would be new avenues for capital flight which implied that as China did loosen capital controls, that it would have to increase reserves.”

    China’s financial system had problem back then (mainly NPL problems), but was not the kind of problem that South Korea and Southeast Asian countries had (combination of foreign short-term loans, floating exchange rates and loose capital control). China’s banks were (and are) owned by the states, had little exchange rate risk exposure and the majority of the foreign capital were FDI. China does need foreign reserves, but as China’s economy is configured, it almost always has current account surplus. That’s why I disagreed with QingDao that China somehow “learned” the lesson to accumulate large sum of foreign reserves.

    Particularly, China does not need 2 trn USD fx reserves. That’s a waste of resources and put China in a quandary. The huge fx reserves were the result of maintaining a stable exchange rate. It may look good now for China to hold such a large fx resevers, but had China started the adjustment earlier and quicker – it should have started RMB appreciation in ’04 and allowed RMB to appreciate in ’05, ’06, and ’07 as quickly as in ’08, it would not have so much fx reserves, but then again it would not depend so much on export and therefore would not need that much reserves anyway.

    These are all hindsight now, of course.

  • Posted by Lyle Burkhead

    Japanese savers could buy a lot of Treasuries. The alphaville link provided by gauis marius says:

    The Ministry’s latest figures, published today, show that Japanese investors bought JPY 1.23 Trn worth of foreign bonds in the week ending February 19th – a figure only exceeded over the past four years by the JPY 1.36 Trn worth of purchases the previous week. Whilst the magnitude of last week’s total spend is hardly a rarity, consecutive weeks’ purchases of such magnitude most certainly are, and we have to go back to the autumn of 2001 to find comparable figures.

  • Posted by df

    with falling asset prices, how is the asset/debt ratio going these days ?

  • Posted by df

    test

  • Posted by df

    seems posting links is not allowed, well, too bad.

  • Posted by Judy Yeo

    Greg

    sorry to interrupt your chat with 2 fish but do you really believe that China’s reserves are really to back up its exports? (re your last comment: it would not depend so much on export and therefore would not need that much reserves)Whatever China’s yuan policy, its dependence on export would have been hard to change as it is now. Turning an ocean liner requires as much luck as time, capacity and foresight /planning, not to mention enough deep blue sea. changing from export oriented to consumption based is not something which can be done in a couple of years.

    as for the treasuries issue, perhaps Hilary Clinton’s sales pitch is alreafdy a clue in itself?!

  • Posted by Twofish

    Kafka: , I mean Goldman is right and savings sky rockets to 8% what happens to consumption? If consumption continues its rapid decrease, what happens to GDP?

    What should happen is that consumption goes down, investment goes up, demand stays the same. If you increase savings it changes the components of GDP, but it doesn’t change GDP itself. Less money spent on buying consumer goods, more money available to build new factories.

    Where this breaks down is that it requires banks that takes savings and then creates loans, and if you have sick banks, then this isn’t happening.

  • Posted by Twofish

    Kafka: How does borrowing money to allegedly stimulate the economy (and line the Politicos and their friends’ pockets) do anything but under the best case scenario prevent a more rapid decrement in a debt financed consumption based economy?

    Borrowing massive amounts of money pays for the transition from a debt-financed consumption based economy to a savings-financed investment based economy.

  • Posted by Kafka

    Twofish, dude, I does not increase tax revenues much and what is I gonna be in, the consumers are already maxed out, the U.S. can’t compete with China in manufacturing unless prices increase dramatically (which of course creates a whole other set of problems). I would have thought by now the rational actor model would have been debunked, maybe not. I will say it once again, you can move the paper around all you want unless production and exports increase, nothing is gonna matter as everyone in the U.S. moves closer to an ever decreasing middle, welcome to the USSA.

    ………………………………………………………………………………………………
    The current crisis might be characterized as an example of the final stage of a well-known boom-and-bust pattern that has been repeated so many times in the course of economic history. There are, nevertheless, some aspects that make this crisis different from its predecessors: First, the preceding boom had its origin – at least to a large part – in the development of new financial products that opened up new investment possibilities (while most previous crises were the consequence of overinvestment in new physical investment possibilities). Second, the global dimension of the current crisis is due to the increased connectivity of our already highly interconnected financial system. Both aspects have been largely ignored by academic economics.
    http://www.debtdeflation.com/blogs/wp-content/uploads/papers/Dahlem_Report_EconCrisis021809.pdf

  • Posted by Ron

    More Americans Are Saying No to the FED & the National Debt!

    Washington has bailed out the banks, Wall Street & their Washington special interests and much of the cost is added to the national debt to by paid by this and future generations while real estate and investments continue to fall. Find out what a growing repudiate the debt movement could mean for treasuries, the dollar, gold and mining shares.

    The Campaign to Cancel the Washington National Debt By 12/22/2013 Constitutional Amendment is starting now in the U.S. See: http://www.facebook.com/group.php?gid=67594690498&ref=ts

  • Posted by balckswan

    Why would US savers buy 20-30 year treasuries?

  • Posted by blackswan

    hey can you fix my name and delete this message?

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