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March TIC Data Released: Broke UK's Treasury Holdings Go Exponential
The March TIC data was released. We will provide a longer analysis later in the day, but there is just one thing that readers need to know: UK has now gone exponential in its holdings of Treasuries, with total US Treasuries "held" by the UK increasing by $45.5 mbillion over February, or 20%, to a new total of $279 billion. As we now know that the UK is essentially running out of money, to assume that the UK government is buying up our debt when it itself needs to restart QE any minute, is childish at best. Total foreign holdings increased by $134.2 billion to $3,885 billion, with both China and Japan once again buying openly. And since China is now no longer bashful about disclosing its official increase in UST holdings, this leaves the only possibility for the UK ramping up UST purchases as being 1) either a proxy for hedge funds, which however are traditionally represented by Caribbean Banking Centers (which also increased from $144.5 billion to $148.3 billion in March), or 2) a shadow Fed purchasing operation, which also implicates the surge in Direct Bidder interest which we have been focusing on for many months now.
Here is how UK holdings of US Treasuries look like since June 2009. Note the increasingly exponential curve to the chart.
Below is a detailed MOM change in UK holdings:
As for the other two key holders, China and Japan, below is the monthly chart of Chinese LT and ST holdings:
Below is the Month Over Month change in Chinese holdings by category...
And Japan
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Previous analysis undertaken at multiple sites suggested that Chinese purchases were also going through the UK. This may be what's at play here.
If the Chinese were dumping, I could understand why they would want to hide it, but I'm not sure why they would want to hide that they are buying. Of course, I don't understand much. :-)
Zombie:
i'm no expert but do believe that with multiple global players and multiple deals on the table, the chinese could be using off shore sources to buy so as to deflect internal political criticisms about buying the 'great satans' debt.
having created a voltile political base internally by telling their people about chinese greatness and american weakness, they need to 'sterilize' that base when it comes to doing deals with UST debt that are part of a much larger arrangement.
just my opinion.................
agree this is the most logical explanation.
Hong Kong makes it easy, no? China and US hide in UK, US keeps Caribbean in pocket.
Stealth, obfuscated monetization is different from regular monetization. See?
Yes, it's much more exciting.
It's Easter every day. Oh look, green colored eggs this morning. I can't wait until tomorrow.
You could probably fry an egg on some of HFT terminals this morning (must....keep....DOW...above zero....)
Stealth monetization served with a side of stealth taxes ~
It's what's for dinner...
It's like a vegas magic show except they pull a conquering tyrant out of the hat in the end. There's no bunny.
We must get involved in politics right now. We must establish grassroots political connections now. Government can never admit that it is incompetent to manage an economy made up of 300 million souls. Failure means dictatorship.
I choose "...a shadow Fed purchasing operation, which also implicates the surge in Direct Bidder interest which we have been focusing on for many months now..."
This is the nightmare scenario being orchestrated by those who believe that public debt in a floating currency system is of no real concern. The FED and Treasury will conspire to 'save the world' by pumping reserve accounts into the tens of trillions---precipitating an all-out revolt against the dollar by American taxpayers in the years to come.
I, for one, am pleased to see the confidence the UK displays towards the US government and US economy, and certainly see this as a bullish sign for the US dollar. No doubt they see the US treasury bonds as one of the best investments around! </sarcasm>
Actually, +1, ditto on the nightmare scenario.
+1 .. Agreed
I give the Fed props for creativity.
"I give the Fed props for creativity."
I agree and I cringe when I see comments here or anywhere else proclaiming that Benny and the Fed (sounds like a baby boomer blues or rock band) are "stupid" or "dumb" or whatever adjective they wish to use to describe someone with a low IQ.
These are extremely smart and resourceful people who are also desperate. They will not go down easily nor quietly and we're only deluding ourselves if we call them stupid.
+100
An interesting article on The Daily Bell today expands on the theme -- (my bold for emphasis)
"... we will continue to fight the good fight to focus the alternative press and its viewers on the single most powerful problem facing the world today. That problem is not government itself, not even the power elite and their fear-based promotions. The problem at the root of it all is mercantilism – the ability of private enterprise to seize the levers of government power and through the passage of laws and regulations guarantee formidable profits for themselves and their associates."
http://www.thedailybell.com/1054/Just-Goldman.html
Here's an early article I wrote about the disappearance of leverage and the destruction of capital, and how printing would be needed to replace the resultant lost credit. Note the date. At that time, tens of trillions didn't seem possible. It does now.
http://seekingalpha.com/article/109467-hang-on-to-your-gold
One of the themes I have tried to press, to no avail, is the dilution of capital that is caused by printing money and using it to infuse "capital" into banks. It's not real capital, it's a mathematical lie, and math abhors lies. I attribute this as the cause of the falling marginal utility of debt. Why, in reality, should printed (faux) capital cause a positive reaction in an economy?
But, I am a layman, so what the hell do I know?
My first impression is that you make a lot of sense with that. Thing is, I don't know how Bernanke could keep the leverage at 10 to 1 (Bankerz will do what Bankerz do) and, if in fact they are not lending at all, your 6 trillion recapitalization won't work at all! He will need to print the whole f-ing thing.
Assuming you meant an increase of $45.5 Billion....
$45.5 million, Tyler?
Regards
Fat finger of fate strikes again...
Nah, the mind becomes paralyzed and refuses the B in favor of the M because the B is too horrific. Seems the real numbers we will see are more like Trs.
"...UK is essentially running out of money..."
Well, indeed.
´There´s no Money Left,´ U.K.Minister Learns
http://www.bloomberg.com/apps/news?pid=20601085&sid=azCbhNNMdg98
I'll take door number 2, a shadow Fed purchasing operation.
How about, "We buy your debt and you buy ours"?
I have the solution!
go to the second page of the PDF.
Kite Manager
http://www.bankerstoolbox.com/multicms_uploads/downloads/Kite_Manager.pdf
Actually, what's going on here can be metaphorically represented by something a bit easier to understand:
(http://www.urbandictionary.com/define.php?term=daisy+chain)
welcome to the thought of "you can't beat deflation in a credit based world"... and the USA is still the largest and thought (at least for now) to be the "safest" economy in the world!
Back door Fed monetization via BofE/Fed shell game.
BTW, TD, how on earth is the UK going to start QE2 any minute with Cameron winning the election and forming a coalition under the auspice of "austerity"?
Gilts would melt down at the mere hint of QE2.
Ponzi scheme is running out of punters to BUY.
Next will be draconian budget cuts to try and balance the books.
Sir Evelyn De Rothschild?
Whoever buys them will loose big eventually.
This is a classic physics law: Connected vessels. Water reaches its true level eventually.
A view from Europe: as much as the ECB is taking
fire from all over the place for its bonds-purchasing,
no voice was ever raised in England about the
balance sheet of the BOE and its 2 billion pounds
quantitative easing, so instead of shadow operation from
the FED, though I can well understand the purpose,
this could be a way for the BOE (as unaccountable
as the FED when it comes to audit ) to 'swap'
U. S Treasuries against British gilts it is overstocked with, in case that
market became illiquid, or disapperared as was the
case for the Greek bonds, the Spanish bonds.
After all, imho, the UK is pretty close to a downgrade
and has been playing with fire for a while, and
the new coalition seems even unclearer than the
German one about the size of the budget cuts,
all the rest of Europe has on its agenda right now
Don't worry your pretty little heads, it's all part of Bazooka Economics, a budding branch of the dismal science, spearheaded by an unprecedented collaboration of high-brow academics and low-brow Wall Street money hustlers. It's street graffiti transformed into high end, respected art. Like in the late eighties! It's Fahrvergnugen!
http://www.youtube.com/watch?v=eOnne-90CLI&feature=related
and Christina Romer...
Fahrvergnugen!! Classic
More please, I feel young again
Britain is most likely not buying US debt. Britain fronts for many other sovereign countries around the world that are purchasers of US debt.
It's a race to the bottom. You can already hear the Chinese complaining about the drop of the Euro. The Chinese are going to have to drop prices and the Yuan eventually to keep the game going longer.
The contagion started in the US in 2007 with the US consumer unable to request additional credit from the commerial banks.
It's called a currency swap. Ben swaps USD for GBP with Merwyn King. Ben buys UK Gilts, Merwyn - US Tresurys. So, this is not QE, this is a "swap."
I'm also doing a swap: swapping federal reserve notes for morgan dollars and krugerrands ;)
The only difference is that you are NOT obligated to return the swapped assets on or before a pre-arranged date!
China is as desperate as the U.S. It's a lose/lose situation. It's just a race to see who loses last.
Could the bank that rescued the US banking system in 1907 (which was a major reason for the invention of the Federal Reserve) - be the direct bidder operating offshore (from UK) to muddy the waters about the scale of the rescue operation for T-bonds underway now...
All it is is the BOE stocking up on "reserve currency" in order to defend itself. In the paper world, the UST is pseudogold.
CNBS has a guest who just said the DOW is headed to 5000 by year end.
FOAD Haynes about fell out of his chair.
Jabba the Haines told that guy he'll have him on Jan 1 to call him an idiot on his DJ call.
Well, Jabba, does that mean if we have a lower market you'll take the dunce chair?
That "guest" will NEVER be invited back to pontificate on CNBS again!
If he is not recommending a strong buy persona non grata.
CNBS had the usual sickening quacks on this morning who of course recommended this is the best time to buy ever..honestly. You need a puke bag standing by just to watch this crap.
or 3) as the Pound hits parity with the Dollar they have made a tidy FX profit to tide them over another month.
Umm..this has nothing to do with the UK Government or the Bank of England. It merely represents the change in asset allocation of investment managers/banks/SWF's with a London street address (PIMCO has a London office, so does Goldman Sachs, so does the Bank of New York, or JPM, remember Lehman Europe paid Lehman brothers $400 million the day before it went tits up!). London manages many trillions of dollars in assets.
The tic data has no relevance.
If the pound was to make a further, significant drop, wouldn't owning UST be beneficial for the gov't as it would help them pay down their debt if the sold or held to maturity and received x more pounds for those holdings?