If the U.S. Treasury cynically defaulted only on Treasuries denominated in foreign currencies it would be a most transparent power play that would without question get a tremendous backlash. The U.S. is already wounded on the world stage. Would it risk such a backlash, which could come in many very costly forms, far outside the financial arena? I doubt it. Besides, when you’re the U.S. Treasury, you can’t count on maintaining vital international confidence if you just end up playing a ‘confidence game’, and that’s what your suggesting the Treasury would/could do. I don’t think it could do so.

This is the suspicious part. I didn’t dig up the Feb report, but short term securities must mean something besides t-bills. There are short term mortgage instruments, ABS, and other stuff they may put in this category.

Since 115B left the country in Feb, and the Fed announced QE in early March, if this was a stock, the SEC would be investigating for insider trading.

But maybe it happened the other way around. The treasury had the numbers and gave the whisper report to Bernanke, that spooked Bernanke and he decided they needed QE because external financing dried up. I guess we will never know.

“From these totals, if there was a net outflow of capital from the US, that should have been reflected in major changes in exchange rates. Something isn’t tallying up.”

The dollar index went from 90 down to a low of 78, tho a big part of that didn’t happen till late April-May. We will have to see what the May TIC says. But that is a big drop in my book(which luckily I get to read upside down). The other thing is the gain in secondary currencies was much greater than indicated by the drop in the dollar index. This was due in part to less risk aversion and a rebound in non-majors stock and bond markets.