Monday, March 16, 2009

Alert - Treasury Capital Flow Negative

Well, this is the beginning of the end for the dollar. Appropriate that we are hearing about this just days after the Chinese publicly question their dollar denominated investments. They have been in sell mode for at least a month. Even the mainstream AP article mentions how catastrophic this will be for the dollar. The Greater Depression mentality won't really set in until the current wave of bailout plans completely fail because they can't be financed. When state governments are laying people off by the thousands, public works are slashed, and the cost of everything is skyrocketing, THEN people will begin to realize how bad it is.

WASHINGTON (AFP) – Foreign investors sold a net 43 billion dollars in long-term US securities in January as the flow of capital turned negative, US Treasury data showed Monday.

The decline in foreign holdings was the steepest since August 2007.

The decline came after a revised capital surplus of 34.7 billion dollars December.

If the decline persists, it could spell trouble for the United States, which is issuing massive amounts of debt to finance its economic recovery efforts.

The Treasury data showed a decline in both private purchase and official government or central bank purchases of US securities, including US Treasury and agency bonds, and to a smaller degree, equities.

When short-term securities are added to the figures, it shows a capital deficit of 148.9 billion dollars.

For all of 2008, the US had a capital surplus of 609.9 billion dollars including 514.8 billion in long-term debt held by foreigners.

Last week, US officials scrambled to assure China that its hundreds of billions of dollars in US bonds were safe, after Premier Wen Jiabao expressed concerns about "the safety" of its investments.

Analysts say a loss of confidence in US Treasury securities could cause a dramatic drop in the dollar and force Washington to pay higher interest rates.

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