U.S. Treasury Purchases Surprisingly Not Reliant on China

The Council on Foreign Relations has done a great independent analysis of who has been buying U.S. Treasuries in 2008. In a nutshell, the US managed to place $1.3 trillion of USTs with non-Chinese investors. We urge readers to read this article, but here are their conclusions:

China: bought $120 billion USTs in 2007, and $375 billion in 2008 (and a stunning $276 billion in the second half of 2008)

Central banks: bought $290 billion in 2007, and $650 billion in 2008 (a record)

Private investors: net sellers of USTs in 2007, added over $1 trillion in 2008!

The article assumes logically that central bank demand for USTs in 2009 will drop, as will Chinese purchases due to the drop in China's account surplus.

Bottom line: the majority of the tremendous 2009 fiscal deficit and the general US borrowing need will have to be financed by private investors. If China starts selling USTs or if private investors stop buying, say welcome to hyperinflation (ed. we tend to exaggerate on occasion, but do your homework... this is one scary subject).