The United Kingdom government is a large holder of US public debt and there should be increasing signs of concern that the sharp increase in US government spending will lead eventually to inflation and a collapse in the dollar.
Perhaps we ought to be hearing something on these lines from the Chancellor of the Exchequer:
“We have lent a huge amount of money to the United States...
“Of course we are concerned about the safety of our assets. To be honest, I am a little bit worried. I request the US to maintain its good credit, to honour its promises and to guarantee the safety of the United Kingdom's assets.”
Larry Summers, US President Barack Obama’s senior economic adviser, will respond by trying to quell fears over the burgeoning mountain of US debt, saying that boosting the economy would help reduce debt in the future.
“If you don’t prime the pump . . . it’s much more costly to do it later,” he said in response to a question about comments.
The US was committed to long-term fiscal stability, he said, but it was more responsible to US debt holders to ensure that the economy recovered rapidly from recession.
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7 comments:
Brad Setser has done some research and reckons virtually of the UK's purchases of US Treasuries are on behalf of China.
'Virtually [all, half, ?]...' S; bear with me here( to borrow a phrase), but why would China not be able to do its own buying?
Oh. Gulp. It's another political dimension.
Nobody's quite sure, HG, but maybe the Chinese didn't want ordinary American to be aware of the true scale of their indebtedness to a Communist country. "Another political dimension", as you say.
Does this mean that a large scale liability towards China should be recorded in the Bank of England balance sheet but is not? If so, is the BoE still solvent if these operations are properly registered? I must have got it wrong, I very much hope.
Hi, Caronte: as far as I can understand Setser, UK purchasers acting merely as intermediaries in the purchase. Nice fee earner.
Still politically worrying, Sackerson, but at least the accounting is reassuring...
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