US Budget Deficit - When will foreigners reject US Debt? O'Neil warned of pending crisis
hxxp://www.washingtonpost.com/wp-dyn/articles/A16134-2004Oct7.html
"The [deficit] pressures going forward are too great to allow us to borrow these kinds of moneys on the international market on a sustained basis," said Douglas Holtz-Eakin, a former White House economist who heads the Congressional Budget Office.
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"We have a deficit challenge in the short and medium term," said Joshua B. Bolten, the director of the White House Office of Management and Budget.
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Congress has allocated $174 billion so far for the Iraq war alone, with another emergency spending request expected early next year.
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Days later, at a meeting with the vice president, O'Neill "tipped his hand," said an administration participant in the session, and warned that the government was careening "toward a fiscal crisis." But by then, the Treasury secretary was virtually alone. On Dec. 6, he was fired.
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To finance its deficits, the Treasury has increasingly looked to investors overseas, especially foreign governments, to buy U.S. Treasury bonds. But recent economic data suggest foreign buyers may be losing interest, afraid that a sudden drop in the value of the dollar will upend portfolios swollen with U.S. currency.
According to a Treasury Department report released this month, net foreign purchases of U.S. bonds fell 45 percent in July, to $22.4 billion, while purchases by foreign central banks plummeted 76 percent, to $4 billion -- the lowest levels in a about a year. Sung Won Sohn, chief economist at Wells Fargo Bank, warned clients recently that foreign governments are already cutting back, leaving the Treasury dependent on unreliable bond traders.
"The U.S. will rely increasingly on less stable sources of funding and pay higher interest rates," he said. "It is a fait accompli that the dollar will depreciate further. The dollar depreciation will lead to higher inflation and interest rates, hurting the economy."
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Foreign governments lent the Treasury $3.5 billion in 2001 and $7.1 billion in 2002. Last year, the figure soared fifteenfold, to $109 billion. Japanese reserves of U.S. Treasuries climbed from $317 billion when Bush came to office to $695 billion in July. During the president's term, China surpassed Britain as the United States' second largest foreign lender, with its holdings more than tripling from $50 billion in December 2000 to $166 billion in July.
Oleg V. Mozhaiskov's (Deputy Chairman von der Bank of Russia) hielt eine Rede vor der London Bullion Market Assoc. (LBMA) im Juni 2004 und sagte das sich die ausländischen Investoren mehr Sorgen über die Verfassung von dem US-$ machen als die Offiziellen von der Fed und das es dem US-$ an Disziplin mangelt.
Um die Sache noch zu verschlimmern, sind das US Handelsdefizit und in der Folge das Current Account Defizit auf neue Rekordhochs gestiegen.
Es ist nur eine Frage der Zeit, wann die ausländischen Investoren ihren Appetit für die Schulden von den USA verlieren.
hxxp://www.washingtonpost.com/wp-dyn/articles/A16134-2004Oct7.html
"The [deficit] pressures going forward are too great to allow us to borrow these kinds of moneys on the international market on a sustained basis," said Douglas Holtz-Eakin, a former White House economist who heads the Congressional Budget Office.
....................
"We have a deficit challenge in the short and medium term," said Joshua B. Bolten, the director of the White House Office of Management and Budget.
..................
Congress has allocated $174 billion so far for the Iraq war alone, with another emergency spending request expected early next year.
.................
Days later, at a meeting with the vice president, O'Neill "tipped his hand," said an administration participant in the session, and warned that the government was careening "toward a fiscal crisis." But by then, the Treasury secretary was virtually alone. On Dec. 6, he was fired.
..............
To finance its deficits, the Treasury has increasingly looked to investors overseas, especially foreign governments, to buy U.S. Treasury bonds. But recent economic data suggest foreign buyers may be losing interest, afraid that a sudden drop in the value of the dollar will upend portfolios swollen with U.S. currency.
According to a Treasury Department report released this month, net foreign purchases of U.S. bonds fell 45 percent in July, to $22.4 billion, while purchases by foreign central banks plummeted 76 percent, to $4 billion -- the lowest levels in a about a year. Sung Won Sohn, chief economist at Wells Fargo Bank, warned clients recently that foreign governments are already cutting back, leaving the Treasury dependent on unreliable bond traders.
"The U.S. will rely increasingly on less stable sources of funding and pay higher interest rates," he said. "It is a fait accompli that the dollar will depreciate further. The dollar depreciation will lead to higher inflation and interest rates, hurting the economy."
................
Foreign governments lent the Treasury $3.5 billion in 2001 and $7.1 billion in 2002. Last year, the figure soared fifteenfold, to $109 billion. Japanese reserves of U.S. Treasuries climbed from $317 billion when Bush came to office to $695 billion in July. During the president's term, China surpassed Britain as the United States' second largest foreign lender, with its holdings more than tripling from $50 billion in December 2000 to $166 billion in July.
Oleg V. Mozhaiskov's (Deputy Chairman von der Bank of Russia) hielt eine Rede vor der London Bullion Market Assoc. (LBMA) im Juni 2004 und sagte das sich die ausländischen Investoren mehr Sorgen über die Verfassung von dem US-$ machen als die Offiziellen von der Fed und das es dem US-$ an Disziplin mangelt.
Um die Sache noch zu verschlimmern, sind das US Handelsdefizit und in der Folge das Current Account Defizit auf neue Rekordhochs gestiegen.
Es ist nur eine Frage der Zeit, wann die ausländischen Investoren ihren Appetit für die Schulden von den USA verlieren.
