Tuesday, March 1, 2011

China and the U.S. (part 2)

Recently updated statistics for the US Treasury show China is continuing to purchase US government debt. Officially they hold more than $1.1 trillion (of the $8 trillion that's held publicly).  Earlier this year, Ben Bernanke stated they probably hold more than $2 trillion.

I see this as a good thing for a couple of reason. First, it will help keep interest rates low as government struggles to cut the deficit and the economy slowly recovers. We need to keep our low interest rate loans from China until our economy recovers and households pick up their savings. It shows China still has confidence in the US governments ability to repay the debt. Although I've disagreed with how the Republicans are cutting spending (short term vs long term) it's very likely their mentality of controlling the deficit will reassure foreign investors our desire to contain our future deficits.

1 comment:

  1. It will be interesting to see where the interest rates head next, but got to be very wise with how we deal up with these things because only then we are going to find success. I don’t have to worry too much at all because I have sort of secret that never lets me down. Actually, it’s OctaFX broker with their epic daily market updates, it’s so nice and simple which helps me work out very nicely and I never have to worry much at all.