"UK" Holdings Of US Treasuries Go Exponential, As Foreigners Now Hold $3.96 Trillion Of American Debt

Tyler Durden's picture

According to the latest Treasury International Capital release, total foreign holdings of US debt in April increased to just under $4 trillion, or $3,957 billion, a $73 billion increase. This represents 47% of total debt held by public at the end of April of $8,434 billion. And while two of the three usual suspects increased their US debt holdings marginally, China buying $5 billion and Japan buying $11 billion, the "UK's" purchases of US debt continue to grow at an exponential phase: these have now hit $321 billion in April, having tripled over the past 6 months ($108.1 billion in October 2009), and increasing by a whopping $42 billion month over month. We put the UK in parentheses as the end purchaser in this case is anyone but an an austerity-strapped and deficit reducing UK. Whether this is the domain of the mysterious direct bidders, an offshore FRBNY holdco, or just Chinese buyers domiciled in the UK, continues to be unknown. Yet one look at the chart of UK holdings below demonstrates that something is very much wrong with this series.

Total China holdings:

But much more relevantly - total UK holdings, now at $321 billion.

And here is the MoM change action.

China:

Japan:

and, most mysteriously, the UK:

 

 

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Mako's picture

It will have to continue exponential by someone to keep the system rolling.  US consumer is gone, no credit expansion, without the Federal government creation you would be living in Mad Max right now.... eventually the Federal government will be overran by the freight train that is the equation.

Credit creation at the peak was $4.7T (annualized) 2007

Credit creation now -$808B (Q1 2010) (annualized)

The fat lady started warming up 2 years ago. 

I laugh at these people that think they have found the solution, the US government needs to stop spending.... hahahaha, yeah, remove that creation and see what happens.... instant collapse.

Popo's picture

Agreed.  Although, 1946 shows us there is one alternate scenario of what happens when you stop spending....  You can actually get private sector growth:

http://ideas.blogs.nytimes.com/2010/06/15/the-great-de-stimulus-of-1946/?hp

 

Mako's picture

Was not possible until after liquidation was performed ie Hilter destroyed Europe and northern African and the Japanese emperor destroy major portions of Asia. 

- System starts

- System expands at the rate needed

- System peaks

- System unable to expand at rate needed

- System collapses

- System liquidates

- Rinse and repeat if choosen

After destruction of nearly half of the civilized world, huge demand for raw material products to rebuild. 

There is no demand now because you have peaked, eventually full on collapse.

Calculated_Risk's picture

"After destruction of nearly half of the civilized world, huge demand for raw material products to rebuild."

"There are levels of survival we are prepared to accept." The Architect

Mako's picture

The top people will most probably be fine but someone is going to have to go one way or another.  The Architect was fully aware of the outcomes.

Cognitive Dissonance's picture

It always easy to discuss lower levels of survival when you know you're one of those who will be surviving. At that point it's just an intellectualexercise and the highest priority for you is the potential blow back directed at you from your decisions.

trav7777's picture

Really?  It's 1946 again?  We're again sitting atop the greatest oil reserves that the world has ever known, with 90% of them undepleted? 

Oh no wait, we're not...it's 2010.

Besides, the compound interest function will destroy the money supply before any growth *could* bail us out even assuming we were not energy-supply constrained now, which we are.

quintago's picture

this is where they position themselves to take the US back. The war of independence never ended!

fearsomepirate's picture

Would that be like the instant collapse when the government cut spending in the early 1920s, or the instant collapse that happened when the government cut spending after WWII?

Mako's picture

In neither case had the system peaked, the UK was still creating new credit into the system until the late 20s.  Which is why the US was able to rebound from the early 20s so rapidly. They peaked, system collapsed, and then liquidated in 1930-1945.

In the 40s, huge demand... rebuild the world ie consumer led by the US consumer, even then it was still a slow process. 

That is not the case now, without the US government the system would be generating -$2.8T of new credit... that is collapse.  The fuel is gone ie US consumer.

LeBalance's picture

So Mako, you are saying that at some point the system collapses, yes?

If so is the amount of STHTF smaller or larger the later we stop the music?

If larger don't you agree we should stop now?

Just asking.

Mako's picture

"If larger don't you agree we should stop now?"

The purpose of the system is to expand as big and as long as possible then implode.  The machines in the Matrix were well aware of the eventually outcome, they built a reset button(Neo), unfortunately humans do not have that choice... well why? because if all the humans understood the lie, there would be no system to start with.

If you were wanting to avoid the result, humans shouldn't have started it. 

There is nothing to stop, the system already peaked and you are now collapsing.  The system is not getting larger anymore, it's over... the fat lady is warming up and will with time step out on the stage.

You will be witnessing the biggest and most beautiful song the fat lady has ever sung.

fearsomepirate's picture

Ah.  Well, pardon me if, ~70 years after Keynes and continual failure of the prediction that cutting G in a recession will cause OMG CATASTROPHE, if I remain skeptical of the claim that the economy hinges on the government's ability to destroy the currency and consume the wealth everyone else produces.

Attitude_Check's picture

Continuing the credit "creation" isn't working so well is it?  Yes, you are correct "...eventually the Federal government will be overran by the freight train that is the equation."  Yet despite saying this, because you fear what will happen if/when we change course you recommend continuing the madness that you state will/MUST end badly?

 

There may be a middle ground approach that will minimize some of the broad pain  I call it STIMERITY for stimulus and austerity

1.  Balanced primary budget (without debt servicing) - this is the austerity part.

2.  Direct monetization of debt as it rolls over.  There will be no buying because we will be running a balanced budget.

3.  Checks direct from the US Treasury to savers WHEN their banks fail to cover FDIC insurance (back to the original FDIC levels)

The ability for other governments to peg thier curencies will be seriously limited since the US will not be selling debt.  $'s will pile up overseas through the trade deficit and existing bond payouts with no-where to go since the US will not be selling debt.  The $ will then drop to a point where imports equal exports.

This will be very painful, but he sudden stop should be avoided, and much of the pain will be felt by the folks who are primarily responsible for the mess.  MANY (most?) banks will fail, and asset values will collapse, but the direct stimulus will put a floor under the deflation, and the recapitalize the remaining banks with money from the US Treasury from the depositors of failed banks.  The banking system will survive - just not the present system of TBTF monstrosities.

Mako's picture

"Yet despite saying this, because you fear what will happen if/when we change course you recommend continuing the madness that you state will/MUST end badly?"

I have never said any such thing.   It will eventually collapse no matter what is or is not done, there is no "out".... collapse and then liquidation.

Your plan would be an instant collapse, doesn't sound like a plan at all, as soon as you go to step #1 went into effect... instant and complete collapse.

 

Attitude_Check's picture

So since you think copllapse is unavoidable (I agree) the only question is if there is a way to "manage" it such tht the individuals most responsible pay the most, and the damage is minimzed.  You have no idea how to do that, and seem to relish in the coming oblivion.

No once we implement 1, we simultaneously implement 2 and 3.  There will be no instantaneous sudden stop - the real world doesn't operate that way.  Of course I have a hard time beliving TPTB will choose the path I have laid out unless the politcal classes revolt from thier handlers (which seems to be starting ever so slowly).

Mako's picture

"most responsible pay the most"

Billions are responsible.  The players behind the scene don't really care if you hang a few bankers or paper pushers in DC, they could care less about what happens to the slave handlers.  None of this is possible without the bottom dwellers support, the bottom dwellers will bare the blunt just like always.  The top people didn't get there by being stupid.   Heck, the top will be shorting the bankers to zero and reaping the rewards, after there is no more dead cat bounces and nothing left to short... the top will go into hiberation while the lemmings start liquidating. 

Hiberation will be 1-2 generations is my guess this time.

It's not personal, it's business.... the only way this stops from occurring again is for humans to reject the choice the continue to make over and over expecting the different result.

 

Attitude_Check's picture

"Billions are responsible"  if you mean responsible for breathing and consuming resources to live  -- well yes.  The present Financial world-wide fraud and Ponzi-fication, no.  They are partially responsible for being duped by TPTB, but that is seriously blaming the victim.

So what do you "hope?" or think needs to happen if the pain is hard enough.  What choice that they continue to make over and over, should they not choose in your opinion?

luigi's picture

The blind is helping the lame finding the way?

LeBalance's picture

Off the cliff, onto the pointy crags below.

SteveNYC's picture

Sure, the broke English are buying wads of US debt....I'd buy that for a dollar!

 

Ben's Mysterious Magic Imporium of Debt Hide-the-Sausage.....more like it.

hedgeless_horseman's picture

The Queen is broke!  Long UST is the Queen!

jkruffin's picture

Funny how foreigners holding half of the debt.  In another month they will hold more of our debt than our own people.  Crying shame, but in a way I don't blame Americans for not buying treasuries with the paltry rates offered up.  Can't wait to see how today's 28 day bill auction goes, which I think will be embarrassing to say the least.

Mako's picture

Well, they could buy their own debt instead of UST but that just brings them to their own death that much quicker.   Their debt will go bad before the US, when the US goes it all goes.

Basically everyone is searching for yield but nobody can find it... oooppps.  System is tapped out.   You can beat a dead horse all you want but that ain't going to make him run faster... .it's over... the horse is dead... the jockey can keep beating the dead horse all he wants but it's over.

 

fearsomepirate's picture

What exactly are Americans supposed to buy USTs with?  We're in debt to our eyeballs, and we can't borrow at 0% from the Fed.

trav7777's picture

nobody is really BUYING anything.  It's a shell game.

There isn't enough capital out there to support these purchases of debt at these rates.  Simply impossible.

Every other nation now is seeing bond auction failures...even Germany.  The system of debt compounding is trying to collapse.

Tense INDIAN's picture

i dont understand ...why r the chinese holding to USA debt.....???

Internet Tough Guy's picture

They are just buying a little to maintain the illusion while secretly continuing their real plans. You don't think they are just sitting in Treasuries the past two years do you? Who do you think buys all the cash4gold?

Flakmeister's picture

  Follow the oil....

   The coupon that Japan and China collect pays for over 1/3 of their oil imports. As long as the oil-dollar peg exists, they will hold our debt. As some other observer noted, the only currency pair that matters is oil-dollar.

breezer1's picture

one of the queen's tropical islands. the money doesn't even have to be real counterfeit , just an electronic entry. meaningless, monetization. so far its working. there is no blood in the streets yet.

Stepney's picture

The “UK”’s holding is all the money embezzled by the former ‘New Labour’ regime of B’Liar, followed by the evil snot goblin, McBroon.

 

I wonder how much gold is hidden away in Switzerland’s vaults by McBroon after he ‘sold’ it of cheap.

Gimp's picture

You scratch my back and I will scratch yours.

International market manipulation, probably been going on for years just now with the internet the little people get to look behind the curtain.

Turd Ferguson's picture

This is such bullshit and only ZH bothers to mention it. 

Full-blown Ponzi. Buy the S&P!!!

Oh regional Indian's picture

This is three card monte being played out on a grand scale.

Everyone knows that an EPIC fail is somewhere around the corner. Each of sees the light of the on-rushing train in a different way.

The doomers what it NOW, Splat, get it over with, begin anew

The boomers dismiss it as a mirage

The clueless don't even know they are strapped to the tracks.

The UK loading up on US debt, and if you look deeper at the chart, the % increase is heavily weighted on long-term debt.

Double mystery.

A sinking nation sinks massive amounts of money into a sinkier nation's long-term debt?

Ze plot thickens, like a good zuppe and we dear fellow travellers, might be garnish!

ORI
http://aadivaahan.wordpress.com

AnAnonymous's picture

The debt system is intertwined: you buy my debt, I buy yours with the money you've just given to me.

 

The weak points are in countries who sell their debt without being able to buy. They are the ones that cant be extorted (vulnerable to debt recall) and they are the ones who provide value to feed the Ponzi scheme. Keep an eyes on them. The day they kick the can will be bad days. 

yabs's picture

mako

are you saying that the FED is helping us then?

at least in the short term?

what do you see as the best way to protect welath then?

Gold only or cash or stocks?

Calculated_Risk's picture

The "fed" helping us?! They are helping themselves my friend. They are sociopaths, hell bent on raping and pillaging everything.

Protect wealth? Read history. It'll tell you everything you need to know.

And as you will see, pms always win.

Mako is just going to tell you your going to die. No solutions there.

captain sunshine's picture

They keep buying T's because they know when the end of the dollar comes; it will be fed into the new world cuurency system.

MarketTruth's picture

That would be the IMF using SDRs to then be the central world bankster.

sumo's picture

That's what China sees happening in the long term:

http://www.chinadaily.com.cn/business/2009-03/23/content_7607627.htm

China eyes SDR as global currency

China's central bank chief on Monday proposed a sweeping overhaul of the global monetary system, outlining how the dollar could eventually be replaced as the world's main reserve currency by the Special Drawing Right (SDR)...

Anarchist's picture

What was old will be new again. Countries that can export tangible goods will survive. Those who cannot will be cooked. The west is in a race to block access to resources to play the spoiler. The dirty wars will start in earnest with claims and counterclaims flying. An old boogeyman will be dusted off once the "new" Caliphate has been proved to be a ruse promoted by the west and it's Ziofascist cheerleaders. China is once again in the crosshairs of the wests gluttony. India is so stupid that it thinks it's been invited into the "club". They too will be in the crosshairs. You will see a rush to develop nuclear weapons to deter any adventures by the west. Brazil and other who have vast resources to protect can see the handwriting on the wall. China will work with it's trading partners to do escort duty of container ships. It's gonna get interesting kiddies....  

trav7777's picture

I agree.  I have been saying this for months here.  Real Bills Doctrine is coming back.

Debt as a fundamental premise is being discounted now to reflect a future of contraction.  Life is entering backwardation where promises to deliver in the future are worth less than real things now.  In the aggregate, real production will not grow to meet the coupon plus principal.  Therefore, you cannot lend.

FourWude's picture

Brazil has for years (to the complete overlooking by the west) proceeded to try to build a small Nuclear Arsenal of its own. In fact it has been quite open about it, seeing it as the biggest weapon against any "western" and American hegemony over South America. (South America more than most knows of empire and puppet regimes having been witness to it first hand).

 

India thinks its a growing superpower, problem is, it's probably the only superpower in the world where 400 Million people live in abject poverty. The western powers don't care one iota for the Indian poor and never have. India is basically being "fattened" to carry out the will of the western powers and their Zionist backers, (behind US, UK and Canada, India is now Israel's 4th best friend with deep Intelligence, Military and Economic ties). The problem is India does not possess the money nor the history or will for it to carry out hegemony over Asia on behalf of others. When the time comes India will be abandoned and its problems will mount up, (and if Indians can't fathom this, take a look at what's happened to Pakistan over the past 30 years by the very same power players, do you want to go down the same road?.)

 

China is despised in the west, the EU even moreso than the US. They can't accept that this nation has risen up and can actually stand on its own two feet, and dictate its own policies, domestically and internationally. Everything the west is doing regards China points to isolation of China and war in the long run, problem is I wouldn't mess with the Chinese if you paid me to, they will swarm on any MOFO in a blue NATO uniform, as Ice Cube would say.

 

 

redrob25's picture

UK needs to buy US debt to prop up the system. When you realize that the Federal Reserve was created to the benefit of Britain bankers, it is no suprise that when China and Japan decided to deleverage, that the system creators had to intervene and buy US debt that no one else wants to touch.

The UK, not China or Japan, are the debt buyers of last resort for the US government. Once they cannot buy our debt anymore, the massive unwinding will begin.

spartan117's picture

I believe that is why men like Faber and Rogers are calling for a war.  Governments see the collapse coming and they will stave it off by intiating a major war to destroy that excess capacity.  The winner(s) of the war will then repudiate most of their debt owed to foreigners, and lay claims to global resources to pay off/service internally held debt. 

trav7777's picture

Faber and Rogers? LOL.  I could point you to where I predicted World War in 10-15 years, about 7 years ago.  I also forecast that this thing comes undone when the Fed loses control of the POG

FourWude's picture

The ironic thing is these very people would NEVER call them Neo-Cons nor would they call themselves what they are FASCISTS in every sense of the word, from corporate to militaristic.

 

War as an economic policy... Bravo! That trick hasn't worked since WW2, (and even WW2 was a bizarre, unique scenario). Vietnam, Iraq 2003, Afghanistan, Lebanon 1982, Somalia 1993, all abysmal failures of government to varying degrees, even the Korean war ended in stalemate with fallout to this day. The US is still paying off debt owed due to the Vietnam war.

Ned Zeppelin's picture

UK is not buyer, but rather trustee for Fed as beneficial owner of Ts acquired via creation of pixelated cash strictly for debt monetization purposes.  There is no other answer.