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Foreign Holdings of U.S. Government Securities & U.S. Current Account
CBO testimony before the House Budget Committee (see http://www.cbo.gov/ftpdocs/82xx/doc8264/06-26-ForeignHoldings.pdf) * Foreign holdings of U.S. Treasury Debt have increased rapidly in recent years. Between 2003 and 2006, for example, foreign holdings rose 44 percent -- from $1.45 trillion in 2003 to $2.13 trillion in 2006 and now account for 47 percent of Treasury Debt held by the public. * A persistently large Current Account Deficit will, over time, make foreign investors less willing to provide low cost financing for it. * According to the Bureau of Economic Analysis, the total amount of claims on the United States held by Foreign Investors in 2005 amounted to $13.6 trillion -- 9 percent more than in 2004 and 52 percent more than in 2000. * A broader issue is the substantial deficit in the U.S. Current Account. The nation is running a substantial Current Account Deficit which is financed by increasing liabilities to and assets held by foreign investors. Economists generally agree that the nation's Current Account Deficit cannot be sustained indefinitly at its current level relative to the Gross Domestic Product (GDP)because the nation's indebtedness relative to the rest of the world will grow faster than its income. Views differ on whether a future adjustment in the Current Account Deficit will occur slowly or suddenly, but there is little disagreement that some sort of adjustment is inevitable. * The necessary adjustment in the Current Account Deficit, which requires slower growth in consumption in the future, could take place slower or rapidly. NOTE: There are several points being made by the CBO. Central, among them, is the warning that we cannot continue to borrow more than we can pay back. That the consequences of a loss of confidence in the United States Dollar will result in foreign investors reducing their monthly purchase of U.S. Treasury Notes and Bonds. Indeed, those of you who follow this know that this is already happening now. What are we, as individualsm, supposed to do to protect ourselves? Simple, eliminate our personal long term debt. And sell you assets, turning them into cash. You may want to look at the foreign exchange market, considering exchanging some of your dollars to some other currency that you believe may lose less relative value than the dollar.
	asked by grandpa24551, 6/27/2007
Categories: Debt and Mortgages, Asset Protection

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